It’s hard to believe that in a medically advanced country such as the United States, which is also home to significant pharmaceutical innovation, American physicians and patients are experiencing drug shortages for even basic medications, yet this is the reality in 2023.
The following is a detailed response to a Congressional request for information regarding drug shortages in the United States from Free2Care, a non-partisan organization dedicated to the ideals that healthcare is fundamentally about the physician patient relationship, healthcare can be transformed through price transparency, access and choice, and healthcare is personal, not partisan.
This response was written by Free2Care board member, Marion Mass, M.D., and she documents the crisis she and her colleagues face in managing drug and equipment shortages every day in their respective practices. She also calls out third party middlemen that negatively influence the hospital and outpatient prescription drug supply chains and contribute to the current shortages. While this response is lengthy, it provides vital information that can be easily grasped and shared.
AMAC has been a member of Free2Care representing patients since 2019 and works toward making healthcare patient-centric and physician-driven.
To Senator Crapo and Chairwoman McMorris-Rogers, as well as other interested policy shapers:
Free2Care is a coalition of physician and patient advocacy organizations. We include 34 member groups that encompass 8 million citizens and 70,000 of those are physicians. Below is our response to the Drug Shortage RFI sent out by Senator Crapo and Chairwoman McMorris Rogers
How would you define the scope and impact of the recent and ongoing U.S. drug shortages?
You can pick up the paper and read about how bad the drug shortages are. But Free2Care can talk to physician members. Many of our members are employed by hospitals and do not want their names on the record. When Free2Care sent out an email inquiring about drug shortages to a random group of about 200 physicians, we got back over 100 nearly immediate responses. Below are a few of the stories that illustrate the problem.
-From a neonatologist in a city that is in the top 20 biggest cities in America:
“Parenteral (intravenous) nutrition has been a huge concern. Shortages of phosphorus are an especial problem for our most vulnerable, micro-preemies. Given a variety of shortages, we are constantly having to adapt protocols. It risks patient safety, as we have to adapt quickly, and we are already understaffed. Physicians are burning out from the added workload of having to change our established processes, and the stress of adjusting to a new set of circumstances.
It’s not just meds and solutions. It’s equipment. We also had an issue with umbilical catheter trays. These are sterilized trays of equipment that help us thread a central line into the umbilical vessels of babies smaller than 700 grams. Infants that would fit into the palm of your hands. So we take time we don’t have, time away from our patient care and make the trays ourselves. We don’t get choices, we have to make do for the most vulnerable infants in America.”
For the record, the rate of preterm birth in the United States is highest for black infants (14.4%), followed by American Indian/Alaska Natives (11.8%), Hispanics (10.0%), and is 9.3% for whites.
– From an ER doc in Michigan:
“We had an adult patient with COPD and a pediatric patient with a severe asthma attack. Both were critically ill. The primary treatment is the inhaled drug albuterol. They used all the albuterol in the hospital, then had to transfer one patient to another hospital that had albuterol. Imagine the resources used here, due to a drug shortage. The other patient was transferred to the ICU and got a different drug that was not first line.
A colleague had no bags of IV antibiotics. The bags are essential in ER, as you can hang the bag and the medicine is infused via a pump into the patient’s veins through IV tubing. Instead of hanging the bags, ER nurses had to stand by the bedside and slowly push the medication in. Do the people in charge of our supply lines know we have bedside nurse shortages?”
– From an ICU physician in North Dakota:
” IV calcitrol is used in hemodialysis patients. We had none. Solucortef is essential for very sick ICU patients. We had to ration it.”
– From a pediatric hospitalist in suburban Philadelphia:
“The medication used to treat patients very sick with croup is racemic epinephrine. It’s standard of care to give to any pediatric patient with stridor, which indicates significant upper airway obstruction. We were told it was in shortage and had to ration it. Had to give it to who we thought were the sickest patients. Croup patients are breathing through a straw and can get sicker very quickly. You can’t always predict.”
-From an ER physician in Idaho:
“We were short on IV lorezapam. We use it for seizures as a first line med, and for patients who suffer from alcohol addiction in withdrawal. We also had no premixed syringes of epinephrine in the Emergency room. We need epinephrine to start someone’s heart when it stops. Nurses had to take time to mix the epinephrine into syringes at a time when seconds count.”
How can federal agencies, such as Centers of Medicare and Medicaid (CMS), better address the economic forces driving shortages? Are these agencies using their current authorities effectively?
We have heard for decades that “economic forces are the root causes of drug shortages,” and for decades, patients have suffered with second rate care while physicians are forced to “MacGyver” their way out of shortages of critical medications.
– CMS mission statement: “…strengthen and modernize the Nation’s health care system, to provide access to high quality care and improved health at lower costs.”
We can hardly say that our supply chains are modernized, and we have access when the US drug shortages are worse than ever. And there have been years of increased costs, in part due to shortages. Take saline, sterile salt water, which has been on and off shortage lists for close to a decade. In 2022, an analysis of what we are paying for saline (not including administration) varies wildly at different hospitals: From $153 a bag to $26,000 a bag for something that you could buy online for $10. With no indication of what a patient will pay until they get the bill. Given the taxpayer dollars that flow to hospitals, and the tax exemptions they enjoy, it would seem that CMS should be in the business of discovering how shortage has impacted price and ensuring that our nation’s hospitals are transparent and fair about what they are charging patients for all supplies.
-Federal Trade Commission mission: “promote competition, and protect and educate consumers”
On Page 224 of a White House 2021 paper on supply chains, there is a chart demonstrating the lack of competition in markets for sterile injectable materials. Antibiotics, chemotherapeutics, minerals needed for nutrition and pain medications, all drugs in short supply, are also medications with very little competition among them.
Generic medications account for 90 percent of the drugs prescribed in America, has become increasingly consolidated. Generic medications account for about two-thirds of shortages at any given time.
A report from the National Bureau of Economic Research show that 60 percent of generic medications have 3 or fewer manufacturers, and 40 percent have a single manufacturer.
It is not only the manufacturers themselves. Later in the response, Free2Care will address Group Purchasing Organizations (GPO).
Here is a Statement to the Senate Antitrust Subcommittee, March 15, 2006, describing GPOs as: “an insidious, incestuous, insider system… my GPO investigation has uncovered suspect interrelationships and questionable business practices involving hospital, GPO and major medical suppliers’ executives whose practices often benefit themselves, rather than patients, insurers, and government programs that pay hospital bills.
These concerns are significant and serious, requiring immediate Congressional action…Voluntary efforts offered by the GPO companies—initiated shortly after withering criticism of industry practices—are simply too little, too late.” Richard Blumenthal, Connecticut Attorney General (now U.S. Senator)
Since the time of Senator Blumenthal’s statement GPOs have consolidated further, and in fact engaged in both horizontal and vertical integration.
All of this would suggest that the entire pharmaceutical supply chain has not been adequately handled by the Federal Trade Commission (FTC), given its mission statement.
– Health and Human Services mission: “to enhance the health and well-being of all Americans…”
Free2Care believes that part of this mission is to educate Americans on the issue of drug shortages, including but not limited to education of the scope, duration of the problem, as well as the economic impact it has had on the cost of healthcare.
– Food and Drug Administration (FDA) mission statement: “…protecting the public health by assuring the safety, efficacy and security of human and veterinary drugs, biological products, medical devices.”
While many look upon the drug shortage issue as the role of the FDA to solve, Free2Care would like to express that it is the role of all the above organizations related to healthcare working in tandem with the oversight arms of the US Congress to seek cooperation with all aspects of our supply chain, with the utilization of full transparency, including transparency of conflicts of interest to finally put an end to the decades long problem of medication shortages in the US.
What role, if any, has growth in the 340B program played in drug shortage trends?
In our Free2Care 2022 position paper, pp 19-23 details a brief overview of the 340 B program and its explosive growth to become the second biggest federal medication program. $2.4 billion in 2005 to $38 billion in 2020. We all say that the drug shortage issue is an economic issue. If drug manufacturers are providing deep discounts that add up to nearly $40 billion in discounted purchases, it is hard to imagine that the forced discounts are not adding to the economic barrier for drug makers manufacturing needed medications. Free2Care calls for greater oversight and transparency of 340B such that these discounts are helping the economically disadvantaged, as was the intended mission of 340B.
Are there any other issues leading to drug shortages?
Free2Care had been forthright in our inaugural position paper and in our updated 2022 position paper regarding the role of legalized kickbacks (often euphemized as “rebates”) for GPOs and PBMs in a distorted marketplace for medications and supplies in the medical space.
From the 2022 paper:
“The burden of rebates/kickbacks on the nation’s annual healthcare bill has tended to reduce the number of manufacturers for supplies and medicines. The wealthiest manufacturers of medical supplies and devices can afford the kickbacks expected by the GPOs. Smaller competitors have tended to disappear or never enter the market in the first place. The effect of this winnowing by kickback has been a brittle supply chain with known shortages of hundreds of products. Over 200 are now on the list of drugs and solutions in short supply—chemotherapies, antibiotics, and anesthetics, even generics. Many more have been on and off that list chronically for decades. Does the reader remember the shortages of personal protective equipment (PPE), masks and surgical gowns) in the early stage of the pandemic? Does the reader remember the firing of whistle-blowing physicians and nurses who used their own PPE, thus drawing attention to how the institutions they worked for were short of the PPE that the contracting GPOs should have supplied via their chosen distributors? These products should be plentiful and inexpensive because of a crowded field of competitive producers. The mere fact that shortages exist, especially for generics and basic supplies, is a huge red flag, signaling that a gross distortion of market forces has forced the misallocation of resources (like available money) in the marketplace.”
Free2Care has also publicly asked for greater transparency in the medical space, the transparency of conflicts of interest between all aspects of the supply chain.
Specifically, on page 82 of our position paper we ask for “Development and passage of legislation—an historic “Sunshine for ALL Act”—requiring documentation in a database of streams of funding between and among all of the following going back ten years:
- Drug and medical device manufacturers.
- Hospitals.
- Hospital systems.
- Pharmacy and device channel companies (the PBMs and GPOs).
- Distribution companies (such as AmerisourceBergen, Cardinal Health, and McKesson).
- Professional societies of providers of medical care.
- Advocacy organizations for both patients and physicians.
- Educational organizations for patients.
- Providers of continuing education.
- Co-pay assistance organizations.
- Healthcare data-collection entities, private and public.
- Think tanks.
- Corporate media, including (but not limited to) newspapers, television networks, and social media.
The database should also document total payments in excess of $10,000 to non-physician providers during the ten preceding years.
Free2Care wishes to ask that, similar to how PBMs have been present at Congressional hearings, representatives from the biggest GPOs (Vizient, Health Trust and Premier), be asked publicly the following questions:
- There are so many similarities between the business models of GPOs and PBMs. Both have exemptions from the anti-kickback statute that is rooted in the 1987 Medicare and Medicaid Patient Protection Act, there is opacity in the money flow for both GPOs and PBMs, there is the potential for sole source contracting of vendors. In the last few years, PBMs have formed their own GPO to serve as rebate aggregators. Are PBMs giving GPOs a bad name? Do the industries collaborate in any way?
- Because GPOs can collect monetary renumeration from manufacturers, and with recent consolidation, can control what products arrive in nursing homes and hospitals, they have the potential to choose sole source suppliers (see below re: contrast shortage). A sole source supplier gives us a brittle supply chain. How many generic products have a sole source making the product for each of the major GPOs (Premier, Health Trust and Vizient)? (Ask each GPO separately)? For how many are there fewer than 4 sources?
-GE shanghai plant shutdown caused a shortage of contrast dye that was medically dangerous for patients.
The market for this dye wasn’t always so consolidated. In 2003, four firms had a roughly equal share. One company Bracco gave a statement to Congress about GPOs locking them out.
noting that their salespeople were not even allowed to speak to Novation hospitals. (Novation is now, merged into Vizient.) For example, The University of Utah, wanted to switch contracts to Bracco products, but were told that “any attempt to purchase off contract would cause the hospital to forget up to $80,000 per year in discounts on other products throughout the hospital.”
Bracco gave a list of examples of Novation preventing an open market for contrast dye. The market consolidated into two firms, GE (which bought Amersham, one of the producers) and Bracco. GE offshored its production, and did not have enough extra capacity outside of Shanghai to serve the U.S. The result is a shortage.
- Are GPOs involved in the purchasing of infant formula for hospitals or any medically related centers?
- Do you believe that America has a right to know when physicians, hospital personnel, including executives, and members of the press are paid by GPOs?
Below, Free2care offers several examples of arrangements that have the potential of conflicts of interest, which lead to questions that we believe deserve some scrutiny.
-CNN Chief Medical Correspondent Dr. Sanjay Gupta was a keynote speaker for a Vizient conference in mid- November, 2021, and spoke at a Vizient conference September 17, 2019. Was Gupta paid for these appearances and how much? His minimum speaking fee is $150,000. Former FDA Commissioner Dr. Scott Gottlieb also gave a paid keynote at the 2021 Vizient event. Was he paid and how much?
–Redonda Miller M.D., is President of Johns Hopkins Hospital. There is an SEC filing showing her being voted on to the board of the distributor AmerisourceBergen. Board members receive salaries and stock offerings. See pages 16 and 17 of this document
-In 2017, four top Emory executives were on Vizient’s board. Were any of these executives compensated?
-Kevin Sowers, president of Johns Hopkins Health has been on the Board of Vizient. Is he or was he ever compensated monetarily by Vizient and if so, how much?
- Remdesivir became the number one spend drug in Vizient hospitals. $1 billion in 2021. What rebate was offered to Vizient by Gilead? Do you believe HHS OIG should ask for this information? Does the public, especially those who received Remdesivir, and families of patients who received it and lost their lives have a right to know?
- In the fall of 2018, Duke Margolis and the FDA held a joint symposium on drug shortages. At that time, Todd Ebert was the head of HSCA, the lobby group for GPOs and is on record at that symposium as stating that HHS OIG has never recognized their regulatory authority asking to see the rebate contracts.
Has HHS OIG asked since 2018?
- In a 2014 study, GAO recommended that the Secretary of HHS determine whether hospitals are appropriately reporting administrative fee revenues on their Medicare cost reports and take steps to address any under-reporting that may be found. HHS agreed with the recommendation.
The 5 GPOs in GAO’s review reported being predominately funded by administrative fees collected from vendors, which were almost always based on a percentage of the purchase price of products obtained through GPO contracts. The 5 GPOs reported that these fees totaled about $2.3 billion in 2012, and nearly 70 percent of these fees were passed on to GPO customers or owners. With the new consolidated GPO, what do these fees total in 2021 and 2022?
7a: Can these numbers be confirmed with hospitals?
7b. Are hospital representatives willing to be transparent regarding their administrative fee revenues?
- In 1991, HHS-OIG issued a regulation establishing the requirements that GPOs must meet in order to qualify for safe harbor protection under the Anti-Kickback statute. Will GPOs go on record and state that their contract administrative fees are 3% or less of each product’s purchase price?
8a. Will the GPOs present disclose annually to Secretary Beccerra should he ask?
- To qualify for safe harbor protection, a GPO must be authorized to act as a purchasing agent for a group of individuals or entities that provide services for which payment may be made under a federal health care program and who are neither wholly owned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO, either directly or through another wholly owned entity. See 42 C.F.R. § 1001.952(j).
Nevertheless, there are ownership arrangements between Premier and Greater New York Hospital Association and likewise HCA and Health Trust. Can the involved entities detail percentages of ownership in each case?
- How did revenues from HealthTrust help drive HCA’s revenues in 2021? Some of that is due to COVID hospitalizations, what percent is due to any COVID medications, supplies due to administration of COVID meds, COVID testing equipment, etc. that Health Trust counts as revenue? HCA Healthcare annual revenue for 2021 was $58.752B, a 14.01% increase from 2020. HCA Healthcare annual revenue for 2020 was $51.533B, a 0.38% increase from 2019.
Thank you for this opportunity to respond to the issue of drug shortages in the United States.
In the comment I wrote two days ago I stated that I thought some of the terminology involved in this issue needed simplification — I should be clearer about what I meant. Marion Mass wrote near the beginning of the article about how the middlemen involved in this matter negatively influence the hospital and outpatient prescription drug supply chains and contribute to the shortages. So, as I understand it that is the core of this whole matter. And having a better understanding of what all is going on in that sense — that is what could be considered in need of simplification .The more I read about Free2Care , the more I like it. Free2Care sounds like a great organization, and taking on issues like this drug shortage situation is important and admirable . Prior to a few days ago when I first read this article I did not realize what was involved on this topic. Had some understanding of the issue , but not any detailed knowledge of the matter . Have been interested primarily in public health and public health law since the 1970’s — and I truly believe that if a large number of people with Conservative values were to get involved in public health it would help matters a great deal. An organization called the Public Health Leadership Conference wrote a Code of Ethics for Public Health in 2001 – and I believe that most people with Conservative views would find that 2001 Code of Ethics acceptable — it respects the rights of people . A 2019 revision of it written in connection with the very far left , very liberal American Public Health Association reflects an outlook that is liberal, left leaning. I would like to see the 2001 American Public Health Leadership Conference version be regarded as the standard. With respect for Free 2Care and AMAC Action , in the spirit of Faith, Family and Freedom. Best Wishes.
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This is a very important matter, I appreciate the work that went into this article. What I do believe is needed in order to make the improvements needed on this topic would involve a simplification in the approach to how all of this information is presented — I think in terms of mathematics, and how mathematics is a form of reasoning, and how mathematics should be a way to make complicated matters understandable. And it looks as if the matter of ethics needs to be considered more in various aspects of this issue. Another article by AMAC Action, written by Bob Carlstrom “Government Price Fixing Racket Sacrifices New Medications for Senior Americans ” I made a comment and said that something seemed to be out of balance on the Ethics scale. This issue, addressed in this article , indicates the same thing ,along with the very intricate presentation of what the many systems involved are all about. So, to summarize the Ethics scale needs to be balanced, and the terminology needs simplification. Free2Care sounds like a very good organization ; in the spirit of respect for Faith, Family and Freedom. Best Wishes for all at AMAC Action.