Diagnosing Drug Shortages

Abstract

Wealthy countries are increasingly experiencing shortages of a wide range of generic drugs. These shortages are creating substantial harms for patients and problems for health systems. Despite recurring shortages and industry investigations, the nature and character of the drug shortage crisis remain the same: shortage drugs provide slim or negative profit margins, generic drug companies are reluctant to invest in quality improvements, and manufacturers are finding more reason to exit shortage drug markets. This thesis catalogues and explores these and other causes of the problem.

The proposals that have been made to address the problem at best merely mitigate it, and only target the systemic manufacturing and regulatory issues that immediately precede a shortage. The targeted issues are only symptoms, and not the root causes of drug shortages. In order to properly address the drug shortage crisis and minimize these symptoms, solutions must acknowledge the underlying economic mechanisms that make the crisis a reality. This thesis argues that, specifically, tackling drug shortages requires that one examine the economic pressures exerted on drug manufacturers by the Medicare Modernization Act’s Average-­Sales-­Price reimbursement system, and the practices and behaviours of group purchasing organizations. To understand these pressures and effects on manufacturers is to uncover some of the root economic causes of the drug shortage crisis that give rise to the manufacturing issues immediately preceding drug shortages.