FDA Report Considers How to Incentivize Drug Makers to Avoid Shortages

October 30, 2019

The FDA released a report that finds 3 factors responsible for the problem, including a lack of incentives for manufacturers to produce less profitable drugs.

With continued concern swirling around US drug shortages, the FDA Tuesday released a report that finds 3 factors responsible for the problem, including a lack of incentives for manufacturers to produce less profitable drugs.

The task force was convened a year ago by then—FDA Commissioner Scott Gottlieb, MD, who said he was willing to ask Congress for more authority to fix the problem, although the FDA has little control over drugmakers’ day-to-day operations.

The report also cites logistical and regulatory challenges that make it difficult to bounce back from a disruption, and a lack of recognition and reward for manufacturers that go beyond the baseline of Current Good Manufacturing Practices and achieve what the FDA calls “mature quality management.” Such a system, the report said, “builds in a performance and patient focus that utilizes technology, statistical process control, and planning activities to ensure a reliable supply of the drugs manufactured at the facility.” That process allows for early detection of supply chain issues, the FDA said.

The report is the result of an FDA-led interagency Drug Shortage Task Force; the analysis of drug shortage data and the development of solutions came in response to a request from 31 senators and 104 congressional representatives in June 2018. The report analyzed information from various stakeholders, published research, and an economic analysis of market conditions affecting drug shortages.

“Despite public- and private-sector efforts to prevent and mitigate drug shortages, they continue to occur and persist,” said Acting Commissioner Ned Sharpless, MD, and Janet Woodcock, MD, director of the Center for Drug Evaluation and Research, in a joint statement.

The report analyzed 163 drugs that went into shortage from 2013 to 2017 and compared these medicines with similar ones that did not go into shortage. Affected drugs:

  • Were more likely to be relatively low-price and financially unattractive to the drugmaker
  • Were more likely to be sterile injectables
  • Went into shortage due to supply disruption
  • Rarely saw their prices rise after shortages began
  • Had lost profitability, causing their manufacturers to cease production

“These results suggest a broken marketplace, where scarcity of drugs in shortage or at risk for shortage does not result in the price increases predicted by basic economic principles,” the statement read. The report recommended 3 solutions:

  • Create what it calls a “shared understanding” of the impact of drug shortages on patients as well as the contracting practices that may play a role. Previous estimates of the impact on patient outcomes and healthcare costs and delivery may actually be underestimated, and improved quantification of the effects are needed, the report said. A better characterization of the shortages could be helpful, as well as greater transparency in group purchasing organization (GPO) contracts.
  • Develop a rating system aimed at prodding drug manufacturers to invest in their facilities. While the FDA indicated that such a system would be voluntary, the report said that “GPOs and purchasers could require disclosure of the rating in their contracts with manufacturers.” This would add transparency into the market.
  • Promote what the report called “sustainable” private sector contracts to ensure a reliable supply of key drugs through financial incentives or rewarding manufacturers for mature quality management.

In addition, the FDA said it plans to publish new draft guidance on data sharing by the end of the year for manufacturers to disclose when manufacturing of a certain drug ends or if supply is likely to be interrupted. The guidance will also request that manufacturers provide additional details about the situation to the FDA.

Another planned draft guidance for industry would address risk management, creating an outline for drugmakers to develop, implement, and maintain a plan in order to avoid and mitigate drug shortages.

The FDA also has 3 legislative proposals in the administration’s fiscal year 2020 budget related to data sharing, risk management, and lengthened expiration dates for drugs.

One proposal would authorize the FDA “to require application holders of certain drugs to conduct periodic risk assessments to identify vulnerabilities in their manufacturing supply chain and develop plans to mitigate the risks of the identified vulnerabilities.”

Under the second proposal, the FDA would be permitted to impose penalties if drug manufacturers failed to provide “timely and adequate notification” about manufacturing interrruptions.

Another proposal would authorize FDA to require that an applicant submit studies to FDA if the product is labeled with the longest possible expiration date (shelf life) that FDA agrees is scientifically justified.

Lastly, a recommended international guideline, if adopted by multiple authorities, would streamline regulatory changes after a drug is approved.