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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