How Market Forces Contribute to Drug Shortages

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When lifesaving medications go into shortage, the results can be fatal. Ensuring the continuity of the drug supply chain is therefore critical to public health. Quality issues, which can cause manufacturing lines to shut down or lose productivity, are cited as a primary contributor to shortages, but they are not the only forces at play. The market dimensions and investments that influence shortages have not been as thoroughly explored. To better understand these contributing factors, The Pew Charitable Trusts joined with the International Society for Pharmaceutical Engineering to develop a report, Drug Shortages: An Exploration of the Relationship Between U.S. Market Forces and Sterile Injectable Pharmaceutical Products—Interviews With 10 Pharmaceutical Companies.

The report includes data collected through interviews with 51 executives from 10 sterile pharmaceutical manufacturers of various types and sizes that have experienced shortages. Researchers asked them to cite factors in addition to quality that drove shortages at their companies. The following themes emerged:

• Market withdrawals. A company may take a drug product off the market for many reasons, including quality issues, replacement drugs introduced into the market, and decisions to realign a portfolio to focus on products with greater margins. These market withdrawals can play a role in causing shortages.
• Supply chain design. Lack of coordination among processes involving sales, demand planning, inventory management, and production makes it challenging to plan for and meet estimated demand for a drug product. Although many companies build additional capacity into their supply chains, not all products receive the same level of manufacturing redundancy. Instead, companies establish levels of redundancy based on manufacturing complexity, return on investment, and impact on patients if a shortage occurs.
• Purchaser-manufacturer incentives. Companies said they need incentives, such as guaranteed-volume contracts or the ability to retain contracts, to mitigate the risks of making investments to prevent shortages. Lack of such incentives can keep companies from entering a market to resolve a shortage issue or build the systems needed to avoid shortages.
• Limited market insights into future demands. Without accurate information about the expected demand for a product, especially low-volume, low-margin products, companies are reluctant to invest in setting up additional manufacturing capabilities to protect against future shortages.
• Managing regulatory expectations. Companies said regulatory challenges contribute to shortages because of the time scales and costs incurred in obtaining approval to expand manufacturing capacity or upgrade a piece of equipment. The risks of a shortage increase when these perceived regulatory challenges dissuade companies from making changes, especially to products developed 10 to 20 years ago, that might help meet an anticipated increase in demand.

The report includes recommendations for the pharmaceutical manufacturing industry to address these and other challenges to ensure that patients have continued access to the medications they need.

Elizabeth Jungman directs The Pew Charitable Trusts’ work on public health.