Drug shortages reached a five-year peak at the end of 2022, impacting almost 300 pharmaceutical products including basic treatments such as IV saline and antibiotics. That’s a 30% increase between 2021 and 2022. Hospitals are running out of the drugs necessary to do surgery, treat cancer, and stop blood hemorrhages. Things are getting worse. Drug shortages are becoming more frequent and they are lasting longer. And we want to know why.
Drug Shortages in the United States: Are Some Prices Too Low? – PMC
Drug Shortages HSFAC Majority Staff Report
The Senate Homeland Security Committee Holds a Hearing On Drug Shortage Risks
U.S. Dependence on Pharmaceutical Products From China | Council on Foreign Relations
Letter urging the FTC to investigate GPOs
The Senate Homeland Security Committee Holds a Hearing On Drug Shortage Risks
Life-saving generic drugs with low profit margins getting harder to procure
[00:00:00] Hillari Lombard: Hey guys. Welcome to Moderate Party. I’m your host Hillari Lombard, and I’m sure that many of you have noticed that we’ve been off the air for a little while. This wasn’t a planned hiatus like we’ve done in the past. It was unplanned, unexpected, and pretty difficult to avoid. So today I really wanna talk about why, because I think that it’s, I.
[00:00:25] For the last three months due to a national shortage, I’ve been unable to access medication that I need and have taken daily for 15 years. When I’m not on my meds, I experience withdrawals. I can get sick, I get a headache, and many aspects of my life become really difficult for me to manage. And unfortunately, this podcast was not an exception.
[00:00:43] I really love making this show. I love interacting with you guys and going off air definitely was not what I wanted to do, but it’s what I felt I had. It’s, um, it’s weird. Every month I go to the pharmacy and I get my prescription filled and I don’t really think about it. Sometimes there can be delays, insurance issues, waiting for a delivery, something like that.
[00:01:06] And it can be stressful totally. But I didn’t realize how stressful this could get. I never really considered that there would be a day where I just couldn’t get my meds. Meds that I need, like really? And I don’t know if you’ve ever been denied access to medication, but it’s a pretty scary feeling, especially if it’s a situation like mine where there’s not an endpoint in sight.
[00:01:26] Like no pharmacist could tell me when this was gonna change or when I’d be able to get my medicine. Things really started kicking off for me in November. I went to pick up my prescription and the pharmacist gave it to me, but told me that I shouldn’t expect to get this filled next month. When I asked why, they explained to me that there’s a national shortage.
[00:01:45] And that they don’t know if they’re gonna get another shipment, at least not anytime soon. When I asked for more information, it was actually impressive how unhelpful my pharmacist was. I asked if they knew when they’d be getting the medication in. They said no. I asked if they could put me on a waiting list.
[00:02:00] They said no. I asked if anybody would call and let me know when my prescription could be filled. They said no. The only advice that they could give me is to call every day and see if they had gotten the medication in stock. So I did. I called every. And then I started calling every three days, nothing. So I started rationing the medication that I did have, taking half a dose to try and make it last a little bit longer.
[00:02:23] At the time I was thinking, you know, maybe a week late, two weeks late tops. I couldn’t really imagine a situation in which they would let me go two weeks without a critical medication and that everybody would just be fine with that. But that’s what happened. Eventually, I got a notification in February, two months later, letting me know that my prescription was ready for.
[00:02:42] Incredible. I was stoked, except when I went to pick it up, they told me that all they could give me is a partial fill, meaning that they could give me 10 pills, not my full dose. 10 pills would only cover me for five days. Now, spoiler alert people, even in the weak ass month of February, there’s more than five days in a month.
[00:03:02] So I told them like, you know, Hey, I’m very thankful for this. This is. But when do you think that I’ll be able to pick up the other 50 pills that I need for my monthly prescription? And that’s when they told me that I can’t, that if I take these 10 pills home today, I will void the remainder of my prescription, forfeiting my right to the rest of my medication.
[00:03:25] I asked if there was anywhere else that I could get it filled like a different location, and they told me that they couldn’t tell me if any of their other locations had it. They suggested that I call every pharmacy in town and see if they could. Just a casual task. Um, I contacted my doctor and she’s great, truly, but all that she could really do is offer to write me a prescription for a substitute medication,
[00:03:55] and that wasn’t really helpful because there were reasons that I wasn’t already taking those medications. They either made me sick or they didn’t work for me, which is how I got on my current medication in the first. So I was left with a choice between medication for five days or experimenting with a substitute, so I went back to rationing.
[00:04:13] I took half of my dose to make that five days into 10, and I got to deal with withdrawal symptoms throughout the entire month from going on and off my medication. Eventually, at the end of the month, the pharmacy finally got my original medication back in stock. But the cherry on top is that when I went to pick it up, they couldn’t fill it because the process had taken so long that my yearly prior authorization had actually expired.
[00:04:38] But finally after rationing or going without my medication for three to five months, I was able to get my prescription filled and hopefully, knock on wood, that concludes my personal experience with drug shortages. But the unfortunate reality is that that experience, the one that I just described to you, it’s not that unique.
[00:04:57] It’s happening to people all across the country all [00:05:00] the time. I’ve been noticing a lot of shortest shortages with, um, some of the medications that I’ve needed. One for my son. Um, and some for myself, like recently I went to c v s and they told me that the kind of insulin that I use, I’m type one diabetic.
[00:05:17] The kind of insulin that I use is out of stock. And not only was it outta stock at that location, it was out stock at all the other locations. Right. Well, I’m sitting here on the phone with the lady and she was like, yeah, we’re out. And that was her. That was. You know, and in my, my life it’s, it’s oxygen and then it’s instantly I need, I need both to live.
[00:05:39] When I was going through all of this, one of the things that made it particularly complicated is that I just couldn’t wrap my head around how something like this happens. How does the United States just run out of medication? How does that happen? We’re the most developed nation on earth, the wealthiest nation on earth.
[00:05:55] Like some of the most breakthrough medical discoveries in the last century have come from the United States. How do we just run outta meds? So for our first episode back, that’s what I wanna talk about because while my personal ordeal is over, people all across the country are still dealing with this shit, and I wanna know.
[00:06:16] I’m Hillary Lombard, and this is Moderate Party. Let’s get started this morning. Concerns growing about local drug shortages in parts of the country. As the Triple Demic tightens its grip, we have two prescription drug shortages to tell you about tonight. The Food and Drug Administration announcing a nationwide drug shortage.
[00:06:34] According to a new FDA report, nationwide shortage. Are getting worse. 116 as of this week, including a cancer medication for children drug shortages, the thing that balto wristed all to prevent. In recent years, we’ve seen drug shortages across every layer of our healthcare system. Many Americans are having some trouble finding high profile prescription drugs.
[00:06:58] The hospital can’t get enough of the blood thinner heparin crucial for cardiac surgery. Many pharmacies right now, it’s commonplace that they’re low on supplies. Everything from antibiotics to antivirals, even kids. Over the counter medications, is the number of bacterial infections increase? The antibiotics we need to fight them are getting harder to find.
[00:07:16] The FDA is working to address a shortage of asthma Me. Pharmacy Operations Manager Brian Howard says they’ve seen a shortage in nearly every drug they use At one point or another, the Food and Drug Administration released a list of more than 100 drugs that could soon see a shortage of supply. Some of the drugs on the list are Adderall, insulin, even the life-saving drug, Narcan, shortages of saline, morphine, antibiotics, and critical cancer drugs.
[00:07:42] When the pandemic arrived in the United States three years ago, the country was already short on the drugs needed to place people on ventilators. We were screwed from the beginning. For the last four to five years, we’ve been experiencing a national shortage of Pitocin, which is the medication used to induce labor and control bleeding from postnatal hemorrhages.
[00:08:01] The problem has gotten so prolific that experts have described drug shortages in the United States as a never ending game of whack-a-mole, and it often seems like the more critical the medication, the worse the situation.
[00:08:13] Cancer drug shortages represent a tragedy that’s happening in slow motion. For example, etoposide is a cancer drug that’s been on the market for over 40 years, and typically cost the less than $50 a vial. It is given to patients for nearly a dozen different kinds of cancer, but in 2018, due to a manufacturing delay, this drug was on shortage across the country.
[00:08:34] Which of our patients with cancer should get it? How can we prioritize between American lives? Should our limited vials go to an older woman who is just diagnosed with lung? A young man who’s already been successfully taking it for testicular cancer or a baby with neuroblastoma, an aggressive cancer for which this drug is recommended, but others might substitute.
[00:08:54] As a doctor who’s devoted my life to fighting cancer, it’s hard to express how horrible that is. In this particular case, we had enough drug for our lung testicular cancer patients, and our heroic pharmacist was able to scrape together enough etoposide from the bottom of the leftover vials to also treat the infant patient.
[00:09:12] That is insane. Pharmacists shouldn’t be trying to get leftover medication out of the bottom of a vial, like they’re trying to lick crumbs out of a muffin. It’s ridiculous, but it’s happening all the time. And imagine being one of those cancer patients and having to decide between delaying your treatment at a time when your best chance of beating cancer is to act quickly and aggressively, or experimenting with something less safe and less effective that can wreck your body and maybe not even help you.
[00:09:39] And it also puts doctors in an impossible situation of having to choose who wants to be picking how you prioritize. Person over another one child, over another, one child, over another. The American Hospital Association reported in 2011 the virtually all community hospitals they surveyed had [00:10:00] experienced a drug shortage in the last six months.
[00:10:03] Two-thirds of those hospitals had experienced a shortage of cancer drugs. 88% were short on pain medication, and 95% were lacking the anesthetic drug needed for surgery, and that was a decade. But we still haven’t fixed this problem, and it’s only getting worse between 2021 and 2022, drug shortages increased by 30%.
[00:10:24] We are currently at a five year high for the number of active drug shortages, meaning that we are experiencing more shortages right now than at the height of the pandemic, which is crazy. And all of these things lead us to one irrefutable. Drug shortages are increasing. They’re lasting longer, and they’re putting lives as well as our nation security at risk.
[00:10:48] The question is why, and the answer is complicated.
[00:10:53] Let’s start by talking about generic drugs.
[00:10:55] Former President Trump: Generic drugs can be just as good as the brand names, but cost much less
[00:11:00] in many markets, the brand name is King, right? We can’t help it. Americans love a brand, but imagine going to the store for an Oreo and the cashier hands you something called a cream between. If you’re looking for a kit cat, you might not want a cat caught.
[00:11:15] Or maybe you go to the store and you say that your son would really like a Teenage Mutant Ninja Turtle Halloween costume. And the cashier tells you that while they don’t have that, they have something very, very close and hands you the entirely real pubescent frog of silent war costume, which on name alone truly may be better.
[00:11:34] But I guess that’s really in the eye of the beholder anyway. Generic drugs, so. So if you’re looking for a name brand, you don’t necessarily go with a generic because you think that it’s better you go with it because it’s cheaper. Right. Especially when it comes to prescription drugs, which we’ve been complaining have been too expensive since the eighties.
[00:11:53] That’s the first time that we see a noticeable increase in the amount of frustration around the growing cost of prescription. And at that time, drug makers said basically like, yeah, hey, we know that these are expensive and we’re super sorry about it, but innovation isn’t cheap. And if we only charge what the people want us to charge, we wouldn’t be able to produce the innovative and lifesaving treatments that they like so much.
[00:12:13] So Congress decides to weigh in on this debate. They put their thinking caps on, and they settle on something called the Hatch Waxman Act. It’s a piece of legislation that basically lays out the following framework. A name brand drug manufacturer will get exclusivity for 12. That’s how long the patent on their drug will last.
[00:12:31] Once that patent expires, it opens the drug up to the generic market, which at the time only represented 13% of the US drug market. But once Hatch Waxman is passed, generics explode. They take off right away, and today generic drugs make up 90% of the US drug. In the years since Hatch Waxman was passed, we have developed a healthcare system built on generic drugs, and it has brought the cost of healthcare down, both for patients and the hospitals and healthcare providers that make up the industry.
[00:13:01] So why does this system suck so bad? Everything I’ve described so far sounds like it’s working okay, but it’s not right. I mean, a working system doesn’t produce a record number of drug shortages. So to understand what’s going wrong, you need to look at the supply chain. Okay? For this next part, we’re gonna be doing something that is every podcaster’s worst nightmare.
[00:13:21] We’re gonna have to talk about something that is not only boring, but also incredibly complicated. That’s the devil’s duo, and you’re gonna wanna bail. I know you are. If I was in your position, I’d probably wanna bail too, but I need you to stick it out because I don’t wanna pull this card. But kids with cancer aren’t getting their drugs because of what I’m about to explain to you.
[00:13:39] And you wouldn’t wanna bail on kids with cancer. I mean, that’d be terrible. So focus up, pay attention, and I’m gonna try to make this as short and painless as possible. Here we go. Now that you understand how dependent we are on generic drugs, you need to understand how a generic drug gets made, which means that you have to underst.
[00:13:55] The pharmaceutical supply chain, a system truly so confusing and so complicated, they couldn’t even break it down effectively on 60 Minutes. A show that literally exists to explain complicated concepts and under, you guessed it, 60 Minutes. They had two generic drug experts try to draw the supply chain on a whiteboard to make it a little bit easier for people to understand, and the results weren’t.
[00:14:21] Listen to Bill Whitaker, the host of 60 Minutes, try to struggle through this diagram that they drew him. Why is all of that part of the process? Confusion is on purpose. This is clear as mud. There’s nothing more efficient than this. No bill. There’s actually a lot of things more efficient than this, but efficiency isn’t exactly what motivates the pharmaceutical supply chain.
[00:14:43] So let’s. And for the sake of our purposes, I’m gonna really condense the supply chain down into just a couple key areas that will serve what we need to get through the rest of this conversation. So we’re gonna start at the beginning, and that means that we’re gonna start with the suppliers.[00:15:00]
[00:15:00] Pharmaceutical suppliers are basically the people that gather up all of the raw ingredients and the active pharmaceutical ingredients that you need to create a drug. Okay? That’s their only. Hunting and gathering. And they take all of the ingredients that they’ve gathered and they sell them to a manufacturer.
[00:15:17] The manufacturer is in charge of mixing all of those ingredients together and actually creating the finished product. That finished product is then sold to one of a couple different middlemen. Those middlemen are purchasing the finished product on behalf of a hospital, a healthcare provider, or a pharmacy.
[00:15:33] Then those medications are ultimately sold to you, the. Plus or minus an insurance company or two. Okay, so that wasn’t so bad, right? But here’s the thing. Drug shortages are a direct result of a supply chain that is broken at almost every level. Like seriously, this supply chain is more vulnerable than a Jenga tower surrounded by drunk people.
[00:15:57] Let’s start at the bottom with the suppliers. They gather the ingredients, right? So 80% of the companies that make these active pharmaceutical ingredients are located. It’s actually even more troubling when you look at the list of drugs that the FDA has deemed critical because 90 to 95% of those critical drugs are dependent on ingredients manufactured overseas, and anybody that’s read anything about a spy balloon can probably guess why that’s gonna be a problem when we talk about it a little bit later in the episode.
[00:16:27] Next up, we have the generic drug manufacturers. They are a critical link in the supply chain because they’re the ones that take those ingredients and actually make the medicine right. But they’re also possibly the most vulnerable piece of this supply chain, and a lot of that has to do with price and profit margin, which might actually feel a little bit antithetical because so much of the conversation about US healthcare is centered around this idea that the cost is just too.
[00:16:53] But when it comes to generic drug manufacturing and the impact it has on drug shortages, the problem might actually be that prices are too low. Generic drugs are nearly identical to their brand name equivalent. They have to be, otherwise you couldn’t switch them out as easily. Generic drugs are essentially substitutes for namebrand drugs, which means that the actual makeup of the generic drug and the name brand drug is identical or pretty close to it.
[00:17:19] It has to be. Otherwise, you couldn’t substitute one for the other. Which means that manufacturing a generic drug is just as expensive and just as complex as manufacturing a brand name drug. But the difference is the price tag you command for the finished product. When you go to the hospital and they put you on an iv, think about the things that go into that IV bag.
[00:17:40] Common things like IV saline, sterile water, propofol, all of those drugs cost less than 50 cents a unit, but they’re no less complicated to. Which means that the profit margin is razor thin. Sometimes a manufacturer will only make pennies per unit, so the only way to accumulate any kind of profit is by securing large high volume contracts.
[00:18:03] These are the economic drivers that cause companies to exit the generic drug market, and it prevents new companies from entering it. It leaves us critically dependent on whichever manufacturers are able to stay in business. Makes us really vulnerable to situations like what’s unfolding right now around albuterol.
[00:18:20] One of the most common drugs used to treat asthma. It’s been on the FDA’s drug shortage list since October, but the recent shutdown of a major manufacturer could make finding albuterol even harder. Illinois based ACORN operating Co announced last month it was closing all its locations as it filed for bankruptcy.
[00:18:38] Yeah, so he’s really bearing the lead on this because when he says that a major manufacturer shut down, what he’s not saying is that that is one of four manufacturers for albuterol, one of the most common medications to treat a disorder that impacts 25 million Americans, four companies. That’s insane. So literally, when that major manufacturer pulled out, 25% of the United States Albuterol Supply went with.
[00:19:05] What really smacks me about that is that it’s actually double the average. As crazy as it sounds, the average number of manufacturers per generic drug is two, and between 2004 and 2016, 40% of generic drugs were supplied by only one manufacturer. And this is a major vulnerability because when you are dependent on a really limited number of manufacturers for critical medications, you need every piece of the supply chain to go off without a hitch to avoid a drug shortage.
[00:19:39] You need everything to go right and there’s so many reasons for it to go wrong, and that’s where I come in. We can take a credit card from anywhere in the world and deliver a product anywhere in the world. We can make a profit on every transaction. We’re just the metal men. That’s limitless. If you just take a quick glance at this predicament, it would [00:20:00] be very easy to hear a generic drug CEO say, yeah, we’ve decided to stop making a medication that people need to live because there’s not a lot of money in it.
[00:20:10] And it would be reasonable to think, Hey, that c e O is an asshole. One of the two remaining VIN Christian manufacturers, Teva Pharmaceuticals, announced it would stop making VIN Christian for US hospitals. They indicated that it was a business decision they could make more money on more profitable drugs.
[00:20:29] Uh, than Vin Christine. I don’t understand why companies in good conscious can make those kinds of decisions. None of these companies are poor companies. They have the opportunity to not make as much on one drug and still make plenty of margin and profit on other drugs. That’s Ross days, and though it might not sound like it, he’s part of the problem.
[00:20:51] Ross is a former director at a group purchasing organization called Vizient. In order to buy generic drugs or medical supplies, healthcare groups work through groups like Vizient that are known as group purchasing organizations, sometimes shortened to GPOs. A G P O allows hospitals, healthcare providers and pharmacies big and small to buy goods and services at a better price than they’d be able to negotiate on their own.
[00:21:15] It does this by leveraging the collective buying power of all of its clients. So basically a small pharmacy would get discounts normally reserved for much larger pharmacies. It works the same in a hospital. In the last 30 years, GPOs have seen such a significant rise in both power and prominence that you’d be hard pressed to find a pharmacy or a hospital that isn’t a member of one and on its face.
[00:21:38] A G P O is good for everybody. Drug manufacturers are able to secure the massive volume they need to make a. Hospitals and pharmacies are able to get the drugs that they need at a lower price, and in theory, those cost savings trickle down to the consumer. But it sounds good, right? Unless those GPOs become too powerful and too concentrated.
[00:21:58] We’ve established that every hospital and pharmacy in America is likely to be part of A G P O, right? So there’s probably hundreds of them in. Right group purchasing organizations control more than 250 billion in hospital purchases annually. The biggest three account for about 90% of the business. They typically award the contract to the manufacturer with the lowest price drug, add in all the complex fees, and the group purchasing.
[00:22:31] Organizations grow wealthier while losing manufacturers are squeezed. So 90% of the drugs in the United States are purchased by one of three companies. Awesome. So good. Because everybody knows that when the market has less options, consumers benefit, obviously. So the main purpose of a GPO is to secure a low price for its members, right?
[00:22:51] And we have three GPOs that completely dominate 90% of the purchasing, which doesn’t leave a lot of negotiating room for drug manufacturers. If you refuse to sell through group purchasing organization, or through drug whole cosal. You will not exist. You’re out. You are out. That’s Bill Simmons, a former generic drug executive.
[00:23:09] I think it’s really important to think about the reason that A G P O exists. The primary function of A G P O is to secure the lowest price for its members. And when all of the purchasing power is concentrated into three companies, they’re pretty powerful. And this triggers a race to the bottom on price.
[00:23:25] And a lot of the executives at these middleman companies are very quick to say pharma companies, ak. The drug manufacturers set the price that it’s not up to a P B M or a G P O because everybody has free will baby. But the thing is they don’t, they have no leverage over a G P O, none. So the G P O names the price, and it’s up to the drug company to get.
[00:23:49] Especially because since the product they’re selling is identical to other drug manufacturers making that same product, they can only compete on price because right now there is no incentive for producing a higher quality product or running a high quality operation. Think of it this way, imagine that you own a sandwich shop
[00:24:09] and a competitor moves in across the street, so you go to check out what their store is.
[00:24:14] And when you go in, you see that the inside of their building is identical to your building. Their menu is identical to your menu and their ingredients are the same as your ingredients. You are selling the same product in the same establishment, offering the same experience. This new competitor is gonna take a big chunk of your business because why wouldn’t they?
[00:24:34] You have the same product. The only way that you can set yourself apart from this competitor is to lower the cost of your sandwiches, because nobody wants to pay more for the same sandwich if they don’t have to, except now you are stealing your competitor’s business and the only way that they can stop losing money is to make their price even lower than yours.
[00:24:52] And it goes back and forth. And that is how this plays out in a generic drug market. Everyone is selling the same sandwich, so they just keep dropping the. [00:25:00] And this strips away any incentive to increase quality or create a more resilient supply chain. Because anything that you do to increase quality adds to your overhead and doesn’t differentiate you from your competitor because you’re legally not really allowed to share those things.
[00:25:14] If the end product is exactly the same. You have to cut the cost if you wanna cut the price. So how do you do that without losing. You cut corners on everything else. If the manufacturer of a generic drug finds a way to make that drug more reliable, more consistent, safer, even more efficacious, better at, at curing diseases, uh, the manufacturer cannot communicate this information to the buyers of, of the drug.
[00:25:40] Therefore, he cannot profit by making these. What’s happened in this market is the FDA imposes on the market a vision that all generics are the same. The only difference among them is price, and that’s the only difference. It allows to be communicated. So the principle here is that if you force buyers and sellers to compete on price and price alone, you’re going to get a race to the bottom on every other feature of the product, and that’s what’s happening in this market.
[00:26:08] That smooth talk in Texan is Dr. John Goodman, a leading health policy. And the argument that he’s outlining is true. When there’s no incentive for investing in quality systems, people won’t do it, especially when they don’t have the margin for it, and the result is an even more fragile supply chain that’s prone to manufacturing delays and shutdowns that stem from quality issues or contamination.
[00:26:32] And if you’re struggling to remember whose fault that is, just think back to who is making money off of this system because it’s working for somebody. Drug costs keep going up, like somebody is making money off of this process, and it’s the people in the middle. By some estimates, these middle men, the GPOs and the pharmacy benefit managers are adding 200 billion to the cost of healthcare
[00:26:54] every. And a lot of people point to a safe harbor law that was passed in 1987. It made sure that these organizations like GPOs were shielded from criminal penalties for taking kickbacks from their suppliers. So the result is that organizations in the middle can demand payments from drug companies in return for placing their product in a certain recommendations here.
[00:27:17] So in addition to squeezing them for what little profits they do make, they can demand a fee on top of that, like a pay for play. And the result only hurts the patient. If you’ve ever been taking a medication for a while and you’re on it one year, and then the next year you find out that it’s not covered by insurance or it’s suddenly gone up in price, it’s likely because the middleman stopped getting a kickback.
[00:27:40] GPOs actually even encourage manufacturers to pay premium fees to become a sole supplier. It’s a pay for play practice that narrows the supply chain even further, and they’re getting paid for.
[00:27:53] But of course, GPO executives don’t see it that way.
[00:27:56] It’s not the GPO o’s best interest at all to drive anybody out of the market. I’ve attributed more of the drug shortage problem to some decisions by FDA to start evaluat. Manufacturers differently than they had in the past, which is bullshit. Um, I’m sorry to put it so crudely, but you could not toast a piece of bread with the level of heat that the FDA is putting on generic drug manufacturers.
[00:28:20] And you don’t need to take my word for it. Here’s audio from a senate hearing that was investigating this exact issue. Among other things that increasing f d a oversight of generic manufacturers is playing a role in increasing the cost of generic drugs and cited increases in F D a oversight as a factor contributing to drug shortages.
[00:28:41] You know, one way that regulatory opponents often track FDA oversight is by looking at the number of warning letters that the agency sends out. And these letters basically tell a company to stop breaking the law or face the consequences from that. And there has been a significant increase in FDA warning letters in the past two year, in the past few years, and it would certainly be note.
[00:29:06] If those letters went to drug manufacturers, do you know how many of them did? Dr. Gottlieb, I suspect a significant portion of those letters went to drug manufacturers. Dr. Gottlieb. It’s a trap. Get out while you can. If she laughs before she asks the question, you best believe she already knows the answer.
[00:29:22] Well, actually, my staff checked with the F this week and it turns out that almost none of those letters went to drug manufacturers. There it is. In fact, in 2013, only. Of the nearly 7,000 fda, a warning letters were about generic drug manufacturing problems, and that was down from a grand total of 20 such letters in 2011 woof, 0.15% of warning letters that the FDA a sent went to generic drug manufacturers.
[00:29:55] So let’s revisit. Our sweet friend Ross’s statement about what causes drug [00:30:00] shortages. I’ve attributed more of the drug shortage problem to some decisions by F D A to start evaluating manufacturers differently than they had in the past. What he’s really saying is,
[00:30:16] Duh. The excuse is even more ridiculous if you consider how powerless the FDA A actually is when it comes to generic drugs and mitigating a drug shortage. Yes. They handle the approvals. Like if a generic drug wants to enter the market, the FDA a has to sign off on it. Manufacturers have to register at the F FDA a.
[00:30:32] Sure. But when it comes down to drug shortages, you really have to consider, is the FDA just really bad at this, or are we not letting them be good at it? Consider. The FDA does not have end-to-end visibility of the pharmaceutical supply chain. They don’t require manufacturers to disclose where they get their supplies or who they’re getting them from, and as a result, nobody, not the federal government or private industry, has full visibility into the supply chain, which is basically like calling the cops.
[00:31:00] And when they show up, they have their eyes closed and they just refuse to open. And this exacerbates the risk of a drug shortage because the f d A lacks the ability to accurately predict a risk. They can’t even see which suppliers a manufacturer is using, so they can’t see if a drug only has two ingredient suppliers, so they don’t know how vulnerable it is.
[00:31:21] Earlier in the episode when I was telling you that most of the pharmaceutical ingredients come from Asia, that’s an estimate created by private industry because the FDA does not. And that’s a threat to national security, but I’ll come back to that.
[00:31:37] A drug manufacturer that gets its active pharmaceutical ingredients from like 30 suppliers. Is much more resilient than somebody getting it from two, right? Because if one of those suppliers shuts down, they would have another 29 to go to. Whereas if you only have two suppliers and one shuts down, then you’re dependent on one supplier for your entire business.
[00:31:59] Therefore, you’re more vulnerable and the drug that manufacturer is producing is more likely to see a shortage. Not only that, but the shortage that it does see is more likely to last longer because the supply chain is so brittle that there’s no flex capacity. There’s no way to make up that lost supply because they’re dependent on one supplier.
[00:32:19] That supplier can’t give them any more ingredient. They’re giving them all they have and that drug manufacturer operating at full capacity, they can’t produce anymore, and we could have prepared for that. Bought up an emergency supply of that medication from another country, tried to procure the ingredients and start making it ourselves.
[00:32:38] It’s just like every annoying know-it-Alls favorite phrase, failure to plan is planning to fail, and the F D A is planning to fail. They also have no way to gauge volume. So for example, if you called up the F D A and asked them, Hey, which country sells the US the most generic drugs? They would tell you, well, we’ve approved the most manufacturers from India.
[00:32:59] For the sake of this example, let’s call it 10. The FDA has approved 10 manufacturers from India, maybe another five from Europe, and let’s say two from China. That would lead you to think that we import the most drugs from. But the FDA has no way of knowing that for sure, because they can’t gauge volume.
[00:33:15] So those 10 manufacturers in India could be tiny, and those two manufacturers in China could be enormous, meaning that we would actually be getting the most drugs from China. But the FDA doesn’t know for sure. And that lack of visibility has the pharmaceutical supply chain out here acting like John Cena, because you can’t see me dog.
[00:33:37] They can’t even gauge demand on critical drugs because current law does not require manufacturers to report an increase in demand or export restrictions. And those sinister middlemen, they don’t have to report any potentially helpful data to the F D A. Nobody has to talk to the F FDA A. Okay. No, I’m being mean.
[00:33:55] I’m sorry. In fairness to the F, they do collect some data from Manufac. But they literally can’t even use the data they have because, and I quote, FDA acknowledges that it has been unable to use this data to conduct analyses or predictive modeling because the information is unstructured and buried in PDFs with individual drug applications.
[00:34:14] They can’t predict drug shortages because of a p f. Like, come on. I’m out here and I’m trying to be fair and reasonable, and I’m not one of those people that think the government is just this ineffective bureaucracy that can never help us. No. Like I’m pretty pro-government, but when I hear shit like that, it makes me wonder why.
[00:34:33] Why be pro-government when they can be stopped by something like A P D F? The government of the most powerful country on earth can’t seem to work their way through a P D F document, but it’s fine because it’s not like, I don’t know, life-saving treatment is on the. And it’s just, it’s also like, like have you considered, I don’t know, hear me out trying shortly.
[00:34:54] The F D A has the resources to like hire an intern whose only job is to pull those big [00:35:00] mean PDFs out and create the structured data needed to create these predictive models and prevent drug shortages. I mean, come on. The F D A does not even have the authority to require manufacturers to recall most drugs.
[00:35:16] They can recall food products, biological products like vaccines, medical devices, and controlled substances. But for some reason, the government decides to draw the line on medical drugs. It can only recommend a voluntary recall, which really does not protect the consumer at all because consider in 2020, we’re in the midst of the pandemic, right?
[00:35:36] We’ve all gone crazy washing our hands. They’re basically just bones at this point, and we’re using hand sanitizer everywhere we go. And a major manufacturer of that hand sanitizer floods the market with potentially toxic hand. It’s contaminated and it’s bad enough that the F D A asks them probably very nicely to recall that product.
[00:35:57] But since they could only ask and because it was only voluntary, some companies complied. Some complied really slowly and some just freaking didn’t, leaving toxic hand sanitizer on the market for all of us to use. And technically that part is not the FDA’s fault, right? Like the FDA doesn’t get to decide what type of authorization or authority they.
[00:36:19] So as is so often the case, Congress has dropped the ball. The situation with the d a is also further complicated by how dependent we are on foreign manufacturers for critical drugs, because the F D A only has jurisdiction in the US market, so their visibility and ability to influence foreign drug manufacturers and foreign drug suppliers is really limited, which is another reason why our dependence on these foreign manufacturers is a serious problem.
[00:36:49] So how dependent are we? There’s a little known fact about some of the most common drugs Americans take from antibiotics to part medicine to antidepressants. 80% of the key ingredients used to make them come from overseas. We import two thirds of all drugs in our country from abroad, and the situation only gets worse when you look at the active pharmaceutical ingredient.
[00:37:11] The administration for strategic Preparedness and response estimated that 90 to 95% of generic sterile injectable drugs that are used for critical care in the United States rely on ingredients from China and India. So let’s talk about India first. India is dominant in the global pharmaceutical market, especially when it comes to generics.
[00:37:31] One in every three pills consumed in the United States was made in India, and this did not happen by. India has made a serious investment in becoming the world’s pharmacy. Long-term strategic investments in pharmaceutical manufacturing has paid off, and as it stands today, the cost of manufacturing active pharmaceutical ingredients needed for most medications is 15 to 40% cheaper.
[00:37:53] In India, the United States is India’s top trading partner and their most important export market, and India’s also the world’s largest democracy. But trade tensions between the US and India have been on the rise in the years since the Trump administration. And not only that, but being heavily dependent on one country for generic drugs is a problem because if something happens like, I don’t know, let’s say a global pandemic, we’re at an increased risk for shortage and not being able to get the treatment that we need to survive.
[00:38:21] The country that you’re relying on may have to put its own people first. And that’s exactly what India did during Covid 19 when they stopped exporting key drugs, specifically one very high profile drug that you might remember from the ramblings of this man. A lot of good things have come out about the hydroxy.
[00:38:37] A lot of good things have come out and you’d be surprised at how many people are taking it, especially the frontline workers before you catch it. The frontline workers, many, many are taking it. I happen to be taking it. I happen to be taking it. You’re taking hydroxychloroquine? I’m taking it hydroxychloroquine right now.
[00:38:57] Yeah. Yeah. When? Couple of weeks ago I started taking it because I think it’s good. I’ve heard a lot of good stories and if it’s not good, I’ll tell you. Right. I’m not gonna get hurt by it. It’s been around for 40 years for. For lupus, for other things. I take it frontline workers take it. A lot of doctors take it.
[00:39:16] Excuse me. A lot of doctors take it. I take it. India banned exports of hydroxychloroquine, also known as good old hydroxy and all of the ingredients that go into making it all. In all, India banned a total of 26 active pharmaceutical ingredients from being exported overseas, which put the US in a real bind.
[00:39:35] And you can’t really blame India for it because if we had a stockpile of drugs or the ingredients necessary to make. That was critical to fighting the pandemic. I’m sure that many people would not want us to export them, but these are the cards that we’ve been dealt. Now let’s talk about the other major player China, the Darth Vader to our OB one.
[00:39:54] Have you come to destroy me? OB one China controls approximately 90% of the active [00:40:00] pharmaceutical ingredients as well as the raw materials that are used to make. And their dominance is even clearer when it comes to antibiotics. A Department of Commerce study found that 97% of all antibiotics in the United States came from China, and I’m gonna let Senator Langford explain why that should freak you out.
[00:40:18] Let me set a scenario in front of us. Uh, Russia invades Ukraine, and so immediately the United States cuts off Russian companies and Russian American companies based in Russia. Shut down China invades Taiwan. The United States says, we’re not gonna do business with China right now. 10,000. Some odd number of our active ingredients are coming out of China.
[00:40:44] What happens that next day? Besides my panic attack, Senator Langford, uh, nothing good. The scenario that off-Brand Mike Pence just laid out for us is truly a nightmare scenario, but also a very real possib. We are waging an economic war against Russia right now, and we don’t have the leverage over them that China has over us.
[00:41:06] India’s obviously the trading partner of choice, and it would be easy to think, why not just reduce our dependency on China by doing more trade with India? Yes, there’s a risk, but surely it’s less risk than China who’s classified as a foreign adversary, and that’s not wrong necessarily, but shifting away from China towards India would be like rearranging deck chairs on the Titan.
[00:41:26] Because India might be the leading manufacturer of api. But India depends on China for sourcing nearly three quarters of their API’s in generic drug formulations, making it incredibly difficult to decouple from China because we’re not the only country that’s dependent on them, there is no escape. You would think that we would at least take the situation more seriously when it comes to our military because it seems like common sense that if you would shoot down a country spy balloon, you definitely don’t want them to be the primary supplier of your soldier and veterans critical medication.
[00:42:00] The Defense Department told my staff that with the exception of just three drugs, uh, the, uh, DLA is not able to assess with certainty whether any of the other drugs that purchases rely solely on sources from either China or India. So given this blind spot, as was mentioned in the previous comments, uh, what would happen to veterans, to military personnel and to the US healthcare system at large?
[00:42:24] If, if these raw materials, including those sourced from China and. Simply became unavailable, we would have significant shortages. And, and that’s a little bit about what we have today where our, the, the d o D and and our military are relying on the same commercial market as hospitals. We also have no way of definitively knowing how dependent we actually are on China or any other country.
[00:42:47] Because we can’t see their involvement in our pharmaceutical supply chain. Um, where we are flying completely blind is in our understanding of the, uh, where the key raw chemicals that go into making the active ingredient come from. We have some anecdotal evidence, but we really have no systematic understanding.
[00:43:07] Private companies are choosing to invest in China and manufacture there, and yet they don’t. Where they’re making their products. It’s not a requirement for those companies to reveal which products are made in China, which products are made in India, which products are made in the us and without that information, we really are vulnerable.
[00:43:24] I’m glaring so hard at the FDA right now. I wish that you guys could see it. I’m just mean mugging the shit out of them. If only somebody could get us that data, maybe we could do something to improve our situation, but good God, it might be locked in a P D F. All jokes aside, drug shortages are a major problem, and our generic drug supply chain is as fragile and brittle as a seventh grader self.
[00:43:45] So it’s only gonna get worse unless we step up and really try to fix this. And we need to, because all too often our most vulnerable groups are the ones that suffer disproportionately from a drug shortage.
[00:43:56] News Clips: I’m actually scared. I’m scared for me. I’m scared for my friends. I’m scared for every kid that’s finding cancer.
[00:44:07] He was at the cancer center in the chair on Tuesday when his oncologist told him they didn’t have enough. There are no options. Vin Christine does not have a compatible replacement drug. There is no option to replace it or to substitute it in cases of crisis like this. This shouldn’t be happening. This drug is so important. It’s lifesaving. It’s, as my mom said, it’s like the backbone of all chemos and all of treatment, and then all of a sudden it just goes to his stop. I, I’m just scared. That is heartbreaking. And completely inexcusable. No one should be in that situation, especially not a child.
[00:44:58] Thankfully, the [00:45:00] situation is correctable if we choose to correct it. And so far there are reasons to be optimistic. First, I’m very happy to see that people are starting to turn on the middlemen. Recently, a handful of advocacy groups wrote a letter to the FTC asking the agency to invest. The monopolistic middlemen in the healthcare supply chain known as group purchasing organizations.
[00:45:22] Chuck Grassley and a bipartisan group of senators have been pushing the FTC to investigate the shady business practices of pharmacy benefit managers as well. And while the FTC has been slow to respond, this heightened scrutiny and public pressure is really promising. We’re also seeing a lot of real work being done in government on these issue.
[00:45:42] The House Committee on Energy and Commerce is pushing the FDA for answers on their handling of drug shortages. House Republicans in particular, are putting pressure on the F fda. They sent a letter with 10 critical questions and have demanded answers by April 10th. The heart of the investigation is whether or not the F FDA has done enough to prevent and respond to all of the current shortfalls that are affecting cancer meds and non-prescription painkillers alike.
[00:46:07] The Senate is working on it. The Senate Committee on Homeland Security is tackling the issue of drug shortages directly. It’s a very serious and high profile committee, and it’s currently chaired by Senator Gary Peters, who has been rated the most effective US Senator from either party three years in a row.
[00:46:23] So if you want something done in the Senate, Senator Peters is man to get it done. This committee is specifically examining drug shortages as a threat to national security. So far, they’ve held a hearing and issued a very comprehensive report full of Recomme. They’re currently working to draft legislation that will solve some of the root causes of these drug shortages.
[00:46:42] That’s huge so far. The solutions that they’re working on are focused on helping the F D A get its act together and increase their authority and total supply chain transparency. The report recommends requiring manufacturers of life supporting and life sustaining drugs to report increased demand and export problems to the F D A.
[00:46:59] They also want the villains in the middle to have to report low hospital fill. Meaning anytime a hospital gets less than 80% of what they ordered, that middleman needs to call the F D A and let them know their report recommends conducting a regular inter-agency medical supply chain risk assessment.
[00:47:16] Basically getting all of the organizations that have any kind of stake in this process together and working to identify and mitigate vulnerabilities in our pharmaceutical supply chain. They really recommend that the F D A gets its shit together and figures out how to use its own. Abolish the PDF and develop databases that they can actually use and share with other organizations within the government.
[00:47:40] They wanna work with private companies to track and share data about the supply chain, ultimately leading to full visibility. They also wanna give the F D A the ability to issue a mandatory recall for drug products because Jesus Christ, why can’t they already? They also make a lot of recommendations about investing in domestic manufacturing for critical drugs, and I can’t stress enough how critical that is.
[00:48:02] Everything mentioned before is useless if we don’t do this. And don’t get me wrong, doing so will be expensive, difficult, and time consuming. But I am actually optimistic that we can do it. And a lot of that has to do with the work being done by President Biden. President Biden is a man of a different era, an era when America used to build things and build them.
[00:48:22] His presidency has largely been defined by an era of domestic renewal, not politically or emotionally, but literally. He has focused his time and effort renewing US infrastructure, manufacturing, and research and development. He’s come out for industrial policy in a way that I haven’t seen a president do in my lifetime.
[00:48:39] Industrial policy is basically the idea that the government should its finger on the scale and take an active role in encouraging investment in emerging industries, new factories, equipment, and research across the public and private sector. The Biden administration has gone to bat for investment in the real economy, port and freight expansion programs, clean energy tax credits and loans boost to manufacturing and regions that have been left behind and massive subsidies to reestablish an entire domestic microchip ecosystem.
[00:49:07] I mean, really it’s been big investment in domestic manufacturing overall.
[00:49:11] I’m not saying he’s a perfect president. There are a lot of credible critiques of Biden, but on industrial policy, there is no denying his energy and his vision. So if anyone can get us started on the right path, I think he’s the guy to do it. The Biden administration recently released a new set of drug manufacturing goals and initiatives, aiming at improving the supply chain for critical drugs and better predicting future disrupt.
[00:49:35] They’re hoping to use Biomanufacturing to produce 25% of active pharmaceutical ingredients for small molecule drugs in the United States. They wanna be able to predict at least 50% of supply chain weaknesses and use biomanufacturing adjustments to contend with supply bottlenecks. The investment is awesome, and the report that they issued is inspiring.
[00:49:54] It’s always good to see an administration focus on the future instead of litigating the. His administration has also worked to [00:50:00] strengthen our strategic reserves of critical medications. In the past, we would stockpile critical drugs and release them in the event of a shortage, but this system was not built to respond to a long-term shortage.
[00:50:11] It’s only a short-term solution, and it’s really expensive to maintain because most drugs only have a shelf life of two years. So if you don’t use them, you lose them. However, the Biden administration has changed their approach and instead invested in securing an ingredient. So that in the event of a shortage, the US can manufacture its own drugs.
[00:50:30] It’s more efficient too. Ingredients have a significantly longer shelf life than their finished product, and they’re way more flexible. Think of it like cooking. If you buy a cake, you can only have cake, but if you buy eggs, you can make a lot of different recipes. Do you know what I mean? There is real momentum on these issues and a lot is likely to happen.
[00:50:47] Over the next several months, we’ll be watching closely and hopefully you will. The problem is big, but so is the ambition of this country, and I can’t wait to see what we can do if we actually put our mind to doing it.
[00:50:59] That’s it for today, guys. I just wanna thank you again for hanging with me during that unplanned outage and coming back and listening to the show.
[00:51:08] Again, if you like this episode, please like rate and review the podcast wherever you’re listening, and if you have any thoughts or comments on the episode that you’d like to share, you can always email me at talk moderate party podcast.com. All right, I’ll see you next week. Stay safe.
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