Drug Shortages on Upswing

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According to a new report, medical facilities face an increasing shortage of important, and often life-saving, medications. While drug shortages are not uncommon, the number of them has tripled in the last five years, reaching a record number of 211 drugs in short supply in 2010. This year is no different, as another 89 drug shortages have occurred in the first three months of 2011, according to the University of Utah’s Drug Information Service which monitors shortages for the American Society of Health-System Pharmacists. What drives such shortages? Americans are getting a hard dose, if you’ll pardon the expression, of where removing the profit incentive from healthcare eventually leads.

The first clue is provided by Cynthia Reilly, director of practice development with the society of pharmacists, who contends the principal reason for drug shortages is the consolidation of drug manufacturers. “Manufacturers will tell you they will never discontinue a drug because it’s not profitable,” she said, even as she noted that some drugs may be prioritized over others when such mergers occur. “Are there financial factors? I would say yes,” she added.

Echoing that reality was Valerie Jensen, who heads the Food and Drug Administration’s shortage office. She agrees that the overarching problem is fewer and fewer manufacturers producing medication, including older and cheaper generic drugs, especially injectable ones, which are harder to produce. Thus, if a company has difficulty making a drug, or decides to quit producing one altogether, there are fewer and fewer companies who can step in and fill the gap.

Injectable drugs constitute the vast majority of drugs used by medical centers in emergency rooms, Intensive Care Units and cancer wards, where shortages can last for as long as months, and where alternative medications are less-than-satisfactory substitutes for the real thing. How acute is the problem? “It’s just a matter of time now before we call for a drug that we need to save a patient’s life and we find out there isn’t any,” says Dr. Eric Lavonas of the American College of Emergency Physicians.

Yet even as these shortages persist, experts reveal reality regarding profit: pricier, brand-name drugs are seldom in short supply. In other words, drug companies do in fact consider “financial factors” when they “prioritize” the manufacture of some drugs over others.

For many Americans, especially those of the progressive persuasion, this reality constitutes all the proof they need that drug companies are inherently evil. Yet why do drug companies merge with one another or prioritize the production of certain drugs? Consider the case of Pfizer. From 2001-2009, Pfizer spent $60 billion on Research and Development (R&D) of new medicines, but failed to produce a single drug from its own labs which generated annual sales of $1 billion. Pfizer, along with another industry giant, Merck, have also lost patent protections on a number of so-called blockbuster drugs that make up for such revenue losses. Once such drugs become “generic,” they move to companies willing to sell them for far less, undercutting critical revenue sources for the original producer even as company officials admit they cannot come up with new drugs fast enough to replace the ones that go off patent. Thus, in order to save costs, from the beginning of the recession through 2010, both companies cut 30,000 and 20,000 employees respectively. When employee cuts and mergers take place, what suffers most? R&D, which analysts estimate is two fifths less productive than it was ten years ago.

The loss of patent protection, however, which varies in length of time from drug to drug, is characterized as a win for the consumer. This is undoubtedly true. But at the same time, the loss of billions by the companies which created the drugs in the first place constitutes a disincentive to continue spending billions of dollars in R&D to produce new ones. Thus, fewer new life-saving drugs will be produced in the future.

Another factor in the drug shortage is the result of what happens to drug manufacturing per se when government regulation becomes too onerous. Regulatory and environmental costs (coupled with cheaper labor and construction costs as well) have driven drug manufacturing overseas, mostly to Asia where they can be produced more cheaply. In fact, critical ingredients for most antibiotics are made almost exclusively in China and India. Foreign production makes drugs much more vulnerable to supply disruptions, which produce shortages. Adding to the disincentive to produce drugs domestically is the fact that the F.D.A. inspections of drug factories occur at a far greater rate for domestic plants than foreign ones, something Joe Acker, president of the Synthetic Organic Chemical Manufacturers Association, characterizes as “totally backwards.” Yet such backwardness remains in place.

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  • Eraina

    I wonder what will happen if Israel is obliterated as so many in the world (and in the U.S.) want and all the pharmaceuticals and life-saving devices that it produces are no longer produced?

    • ajnn

      off-point, but an interesting speculation.

  • Don in B.C.

    Great article. This is just the tip of the iceberg. It'll be drugs, then doctors, then nurses, then hospitals. Eventually, you'll have multi-year waits for specialists and then multi-year waits and multiple cancellations for procedures to be performed…. sounds like my home province of B.C. actually

  • Lady_Dr

    Exactly right Eraina. In fact as anyone who has read "Start-Up Nation" knows, capitalism alwasy works, socialism always fails. Hence Israel has become more successful since it began turning towards more capitalism and less socialism. Socialism is a major component for the failure of so many European countries. DO you really want the some organization (government) which delivers your mail to handle your healthcare?

  • Alfonz Shmedlap

    W., 06/01/11

    Of course, The Ruling Elite will always have access to Rx drugs. It is only the ordinary mortals such as myself who will have to appear before a Death Panel to justify continuing my life on a cost-benefit basis, all thanks to Our Beloved Community Organizer from Crook County, Illinois. Al Capone would be proud of him.

    • astra

      Only if by then they can keep the members of a death panel alive and together long enough to even meet… the fools believe their new utopia will be so orderly.
      Ordinary mortals know better and by then will have nothing to lose.
      Ugly beautiful truth.

  • Mimi

    I am a free enterprise capitalist but you are going to have to admit that the government has helped create these mega drug companies with their obscene profits by taking old tried and ture medicines off the market so the drug companies could sell their overpriced new drugs. Paragoric was used for decades to treat diahrrea, colic, irritable bowel syndrome, gall bladder disease, and other digestive tract problems. A 39 cent bottle would last for years because a few drops in a teaspoon of water would cure ailments with one or two doses. Jimmy Carter made paragoric a sign for drug because "since it was an opium derivitave, druggies were likely to take massive amounts of it," notwithstanding the fact that if someone did that he would probably still be suffering from impacted bowels since it's main purpose was to treat diahrrea. Bill Clinton took it off the market, "because it had not gone thru the testing new drugs have to go thru" so drug companies could sell their $5 per pill acid reducers. No tests have been done and none are planned.

    • ajnn

      i took 'paragoric' many years a go. awful tasting stuff, the worst. yuchhh, yuchhhh.

      i wondered what had happened to it.

    • ajnn

      the economists call this 'creating an economic rent'.

      the market is imperfect and some govt involvement can be beneficial but you point out how such intervention is most typically an abuse distorting the market in an effort to create economic rents.

  • Mimi

    Note: Whereas Paragoric was once used to detox drug adicted new borns, doctors now have to use Heroin. Why hasn't some private lab run the necessary tests to get paragoric back on the market. It would solve a lot of our over priced and over used medical care problems.

    • ajnn

      interesting bit of information.

  • Jeremy

    Because the private lab won't make back the costs involved in doing the tests

  • Amused

    Alot of words to describe a simple practice in the Pharmacuetical industry -GREED . It's just getting to a point now where it becomes more noticeable , and that is because the industry is becoming MORE greedy . Yes it will get worse .And it's got nothing to do with the 'profit incentive being removed " . Ever notice the INCREASING number of drug commercials ? That nothing compared to the tactics used in the field . I know first hand a few folks in Merc . Your jaw would drop just watching them operate , and the mentality of their sales objectives is mind blowing .When a drug reaches the point where a patent expires and generics can be produced , there is no more big fat profits for the drug companies and if they run out of "improvements " to a particular drug to reapply for a patent , the drug will then be dropped frrom their product line . Research remains unhindered because it's exactly what produces the new drugs which produce more big fat profits . Thus the cycle starts all over again .

    • Chris

      Amused, you are as usual spouting the progressive talking points, which bear no resemblance to the truth.I worked for ten years in the Pharmaceutical business as a research chemist before being laid off along with thousands of my colleagues nationwide. The Pharma industry is not perfect, but not the evil greedy entity you describe. Government regulation, a ridiculously expensive FDA approval process, out of control lawsuits and bad patent law have been the downfall of the drug industry.

  • Amused

    Yup , there will most definitely be shortages , just hope it's not you in your hospital bed that needs them.