Sandoz report weighs in on how to solve America’s drug shortage problem
Sandoz discusses PBMs, generics and the 340B drug pricing program in its new report titled, Solving American’s Drug Shortage Dilemma, For Good.
Noting that despite successes and benefits, the modern U.S. pharmaceutical market is fraught with challenges, notably near-historic levels of ongoing and active medicine shortages, Sandoz said that for the last six years, 84% of the medicines in shortage have been generics.
Sandoz went on to explain that such shortages are driven in part by deflating generics prices, which have fallen by ~20% since 2019 despite the inflation the United States also has experienced in the same time period.
Pointing out that medicine shortages can have a daily impact for some Americans, such as some patients who experience treatment delays or need alternative treatments because their preferred medication is in shortage, Sandoz said that sometimes, delays or alternative treatments make generally manageable diseases, like hypertension or arthritis, more difficult to treat.
Today it is estimated that a shortage of 15 indispensable chemotherapy medicines is impacting more than 90% of U.S. hospital systems.
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Emphasizing that shortages also are costly to manage, the report said the Department of Health and Human Services' estimates hospitals can spend $600 million annually to manage shortages. HHS also has linked shortages to higher prices, finding that prices for medicines in shortage average 16.6% higher than when not in shortage. Further, patients who opt to use alternative treatments can expect to pay at least three times more for them, the report noted.
Sandoz also argues that deflated prices and consolidation among large purchasing groups restrain manufacturer ability to sustainably meet America’s demand for generic medicines and resolve shortages.
The report goes on to address consolidation among large purchasers of generic medicines, noting that that this consolidation has driven prices to unsustainably low levels, where it can be difficult for manufacturers to recover their manufacturing costs.
Furthermore, the report states that large purchasing groups, such as group purchasing organizations, drug distributors or wholesalers, have amassed immense influence by acting as intermediaries between manufacturers and healthcare providers. These pharmaceutical middlemen wield enormous purchasing power in U.S. markets. For example, today, three GPOs are effectively monopolizing the hospital purchasing market.
Sandoz's report contends that practices like punishing or arbitrary contractual terms may have the unintended effect of harming patients when manufacturers are subsequently forced to cease production of needed pharmaceutical products. As a result of their purchasing power, GPOs are often able to extract contract terms they would otherwise not be able to, which may hamper manufacturers’ ability to account for increased production costs, or otherwise make adjustments that could result in more sustainable manufacturing of generics.
The 340B drug pricing program should be safeguarded from transparent misuse:
While The 340B drug pricing program has been instrumental in providing essential medicines to low-income and uninsured patients by enabling covered entities—such as hospitals, federally qualified health centers and clinics—to purchase medicines at discounted rates, Sandoz pointed out that policymakers and manufacturers have voiced increasing concerns regarding unregulated growth of the 340B program and potential oversight failures for ensuring patients, rather than covered entities, receive the benefits of discounted 340B prices.
What's more, in 2022, the U.S. Supreme Court weighed in and held that HHS may independently vary reimbursement rates for 340B hospitals, but only after the Department conducts a survey on covered hospitals’ acquisition costs.
Weighing in on PBMs, the report states that PBMs command an influential role within the U;S; healthcare system. "For example, PBMs arrange rebate amounts, medicine prices and formulary structures in closed door contract negotiations. Instead of using their influence to lower healthcare costs, PBMs use spread pricing to increase their own profits, by charging managed care organizations, who manage Medicaid, more for medicines than the amount PBMs pay their suppliers (e.g., a pharmacy). In order for patients to access fairly priced drugs, PBMs must stop implementing “spread pricing” and should consider passing rebate savings on to patients,” the report said.
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Providers are struggling with the impacts of historically unprecedented medicine shortages, which are primarily driven by deflated prices for generics, the report also added, “At play also are litigation abuses that chill the incentives for generics manufacturers to develop, litigate and launch generic drug products, which ultimately reduces the availability of generic competition that would drive down the costs for both patients and payers. "
Sandoz said finding a balance between local and global pharmaceutical supply is key to ensuring stable supplies of generic medicines for U.S. patients. "Historical experience with global supply chains demonstrates their effectiveness. While many manufacturers for the U.S. market source materials domestically end-to-end, the broader industry relies on a globally diverse supply chain to source key pharmaceutical ingredients. A geographically diverse supply chain with established, reliable supply partners in countries with US trade relations, offers the best hedge against medicine shortages and rising manufacturing costs," the report said.
Sandoz believes that policy leadership and cooperation from all stakeholders is urgently needed to resolve shortages and foster a more resilient, sustainable generics market in the United States. “Now is the time to make decisive change, for good—let’s make it together,” the report concluded.