No major reaction to Obama drug-shortage executive order

November 8, 2011
Pharmaceutical Commerce, Pharmaceutical Commerce - November/December 2011,

Plan to address worsening drug-shortage sitaution has note spurred legislative activity

Last week’s announcement by the White House of an executive order to spur legislative and regulatory activity in drug shortages was mostly met with a shrug. On Nov. 1, President Obama signed the order, instructing FDA to increase staff dedicated to addressing drug shortages (the increase will be from five to 11-13 people), to press drug manufacturers to be more forthcoming on expected production delays that could lead to shortages, and to start the Dept. of Justice on investigating claims of price gouging for short-supply drugs. There are both House and Senate bills on the topic (seeking to mandate industry reporting, and providing for civil penalties if the reporting is not performed), but no energized push to move these bills out of committee.

In conjunction with the Executive Order, HHS released a study of drug shortages, noting, among other things, that the market for sterile injectables (especially oncologics) is “robust and growing,” but manufacturing complexity constrains the number of companies that can enter the market, while GPOs, who concentrate the main buyers of sterile injectables, have gradually abandoned “failure to supply” clauses in contracts, which penalize contract suppliers who fail to meet commitments. And it suggests that GPOs could strengthen these clauses, in return for allowing higher prices for products to be entertained.

The price gouging claim originates, mostly, with the report published by Premier health alliance, a major GPO, in August, claiming prices were being increased on average by 650% by secondary or other wholesalers. But other analysis has shown that, given the major discounting that goes on with GPO pricing, a short-supply drug could be marked up by 1,400% or more just in the process of buying the drug at Wholesale Acquisition Cost (WAC) and adding a nominal profit margin. In a followup with Pharmaceutical Commerce, a Premier spokesperson said that additional analysis of the data Premier had gathered showed a “range” of markups from 29 to 729%.

An FDA report, updating some of its Drug Shortage progam results, was also released in conjunction with the Executive Order. One interesting finding: in a bit of a bureaucratic snafu, it turns out that while all sole-source CDER drugs approved under NDA and ANDAs have a prior-notification requirement when they become unavailable, hardly any biologics (managed by CBER) do. The definition of “medically necessary” drugs varies across FDA divisions as well.