Last week, AMAC Action attended a Congressional Energy and Commerce Committee hearing in Washington, DC focused on the critical issue of preventing drug shortages in America. The hearing brought together key stakeholders, including government officials, healthcare experts, pharmaceutical industry representatives, and patient advocates, to discuss and formulate strategies for mitigating the persistent problem of drug shortages, specifically, within the generic drug market and sterile injectable drugs. AMAC Action was hopeful the Committee would examine Group Purchasing Organizations (GPOs), the primary source responsible for problems within the hospital supply chain. Unfortunately, many of the so-called stakeholders were associated with GPOs or were simply unaware of their role in the market and did not provide a full picture of the pharmaceutical drug market.
The Committee hearing began with an opening statement from the Committee Chair, highlighting the urgency of the issue of drug shortages in the country and its impact on patient care, particularly during the ongoing healthcare challenges facing the nation. Several key themes and discussions emerged during the hearing:
- Causes of Drug Shortages: Witnesses testified about the various factors contributing to drug shortages, such as supply chain disruptions, manufacturing issues, regulatory hurdles, and market dynamics. It was emphasized that these shortages often result in delayed or inadequate treatment for patients.
- The FDA’s Role: The Food and Drug Administration’s (FDA) role in monitoring and addressing drug shortages was a focal point. Testimonies explored how the FDA could enhance its oversight, streamline regulatory processes, and collaborate with industry stakeholders to prevent shortages.
- Supply Chain Resilience: Witnesses discussed the need to build a more resilient pharmaceutical supply chain, emphasizing the importance of domestic manufacturing capacity, redundancy in critical drug production, and strategies to diversify suppliers.
- Legislative Solutions: Lawmakers and experts explored potential legislative solutions to combat drug shortages. This included discussions on providing incentives for drug manufacturers to increase production, improving reporting requirements for manufacturers, and enhancing transparency in drug supply chains.
- Patient Impact: Patient advocates shared personal stories and highlighted the dire consequences of drug shortages on individuals’ health and well-being, underscoring the need for urgent action.
- International Collaboration: Some witnesses stressed the importance of international collaboration to address the global nature of the pharmaceutical supply chain and potential coordination with other countries to ensure a stable supply of essential medications.
By the end of the hearing, there was a consensus among Committee members and witnesses that drug shortages represented a complex problem requiring a multifaceted approach. They agreed on the necessity of continued dialogue, collaboration between government agencies and the private sector, and potential legislative changes to prevent and mitigate drug shortages, ultimately aiming to ensure that patients have consistent access to the medications they need for their health and well-being.
Unfortunately, the Committee hearing failed to recognize the significant role Group Purchasing Organizations (GPOs) play in contributing to drug shortages. GPOs were looked on favorably by many as a solution to the drug shortage crisis rather than the reason for it.
GPOs are entities that negotiate contracts with suppliers, including pharmaceutical manufacturers, on behalf of multiple hospitals and healthcare systems. While GPOs were at one time designed to reduce costs and streamline procurement processes, their business practices have shifted over the years to reduce market competition and artificially create drug shortages.
GPOs are incentivized to achieve cost savings for their member organization which can encourage them to choose suppliers based primarily on price, neglecting factors like supply reliability and redundancy. To secure these prices, GPOs may enter exclusive contracts with a single supplier for a particular drug or product. This is known as single-sourcing and can leave healthcare providers heavily reliant on a single manufacturer for critical medication. If that manufacturer faces production issues, regulatory problems, or supply chain disruptions, it can quickly lead to drug shortages.
Witnesses and Members of Congress alluded to natural disasters as a main contributor to drug shortages when a main issue is the lack of competition from single-sourcing. Single-sourcing and an overemphasis on cost reduction can make the hospital supply chain more vulnerable. If the sole supplier of a drug encounters manufacturing problems, natural disasters, or geopolitical issues that disrupt production, there may be no alternative source readily available to fill the gap in supply. The Committee failed to receive clarification on this factor from their witnesses with GPO connections. Furthermore, GPOs’ negotiation practices also play a part in creating drug shortages. For instance, aggressive price negotiations can lead manufacturers to reduce production or discontinue certain medications if they cannot meet the price demands set by GPOs.
Despite the witness’s claim that GPOs are transparent and help reduce drug shortages, the top Group Purchasing Organizations have become monopolistic middlemen that disrupt the hospital supply chain and are not transparent. Their contracting tactics and pricing arrangements can make it difficult for healthcare providers and regulatory agencies to predict and address potential shortages proactively.
AMAC Action is active on Capitol Hill working to educate Members of Congress on Group Purchasing Organizations and their anti-competitive business practices that exacerbate drug shortages in America’s hospitals, even for compounds such as saline water, a simple solution but a critical medicine, nonetheless.
