Spotlight: THE HILL's Keeping Pharmacy Shelves Filled Speaker Panel

This summer, while staying in DC, I had the opportunity to sit in on one of THE HILL (a Live Journalism Newsletter Company)'s events. The event focused on analyze the pharmaceutical supply chain, discussing the collective goal of preventing drug shortages and, when they are unavoidable, mitigating their impact on patients.

I found this topic very interesting, and I took notes on the invitation flyer. The live audience which I found myself a part of consisted of a large handful of other summer interns like me, so I was able to connect with them as well. Overall, this was a valuable experience and new setting which I loved to be part of.

The event consisted of four main parts, with the following speakers. I have summarized what each person talked about below.

Agenda:

1. Rep and Dr. Larry Bucshon (R-IN)

2. Chester Davis (President and CEO of Healthcare Distribution Alliance)

3. Dr. Mark McClellan (Director of Duke-Margolis Institute for Health Policy)

4. Panel Discussion of Heather Zenk (Pres of US Supply Chain Cencora), Michael Kleinrock (Research Director in IQVIA Institute for Human Data Science), and Dr. Marta Wosinska (Senior Fellow on the Center of Health Policy).

(from left to right: Bucshon, Davis, McClellan)

1. Rep. Bucshon

There are expansive drug shortages, mainly for generic drugs (which are drugs with the same chemical substances as brand-name drugs – generic drugs are sold after the original drug’s patent expires). Rep Bucshon gave an example to the shortage of carboplatin (used in chemotherapy) and anesthesiology medicines, being in shortage worldwide locations including the US, Indian, and China. The drugs which are Active Pharmaceutical Ingredients (API) are most dangerous to be in shortage because the US doesn’t produce most of their APIs: only 25% are from the US. The reason why most of the medicines that Americans take every day are from outside the US are that the manufacturing costs for generic drugs are lower outside. This can be a challenge because the FDA then has to verify the quality of imported drugs and the export stream can be interfered by geopolitical conflict. Still, it will be very difficult economically to onshore drug production in the US; drugs will always be cheaper to manufacture outside of the US as workers are paid less and we have a free market.

The root of these shortages lies in vulnerabilities in the supply chain. Rep Bucshon repeatedly emphasized the importance of gathering data to map out this drug supply chain. He detailed how shortages may occur with too high demand; when drug manufacturers release a drug, they try to predict the demand of the drug so that they manufacture the enough of the drug- shortages occur when these predictions fall short.

Reflecting his lecture, Congresswoman Doris Matsui (D-CA) and Congressman Larry Bucshon, M.D. (R-IN) introduced the bipartisan Mapping America’s Pharmaceutical Supply (MAPS) Act, which maps out the pharmaceutical supply chain and identifies its vulnerabilities. Then the act has experts (drug manufacturers, HHS, etc) investigate these vulnerabilities to prevent them in the future.

Rep Bucshon reflected on the complexity of the dynamic between drug price and quality. It is hard to reward quality drugs and prevent a “race to the lowest price” because, from a federal standpoint, Medicaid and Medicare will chose the lower priced drugs usually. However, there is a point in which the price becomes so low that a quality distinction is apparent.

The federal government should not manufacture drugs itself because the same shortage situation will repeat itself. Rep Bucshon explained that stockpiling drugs wouldn’t work in the long run because drugs outdate and demand changes. He also brought up the difficulty in adhering to environmentally friendly means of production. The moderator brought up that drug manufacturer plants often produce toxic waste or release carbon dioxide, and Rep Bucshon revealed that to divert money towards environmentally safe procedures would take money away from workers who deserve to be paid well and have benefits. All countries grapple with this dilemma with the environment.

Redundancy is important in case other manufacturing facilities shuts down. The surviving facilities must have the bandwidth to produce more drugs in the short run to make up for less manufacturers and to avoid shortage.

There are 10 measures in Congress about solving the drug shortage because both parties are unified on this issue- it affects everyone, and without a healthy population, there is no functional society.

2. Chip Davis (President of HDA)

The HDA is the Health Distributors Organization, and they serve as the middlemen between manufacturers and providers. Mr. Davis explained that his company takes legal ownership, physical possession, and financial responsibility of medicines in this intermediary step. He piggybacked off Rep. Bucshon’s suggestions and urged more people in Congress to get involved in leadership positions. When surges of demand occur, communication is key to move up the supply chain and even to Congress where change can then occur.

His company specializes in the logistics side of the supply chain, so when a shortage occurs, his company mitigates the negative impact on patients. Distributors are more of a learned intermediary because they are the first people who are notified when there is a shortage. Shortages hurt his businesses as much as everyone else, disavowing the race-to-the-bottom myth that distributors only utilize one supplier. Instead, distributors care about reliability and FDA backing.

He addressed generic medications as more prevalent and demanding more attention. There is a fine line between lowering costs and destabilizing the generic drug industry, but this process is hard to stop in a free market.

The HHS released a white paper talking about potential resiliency programs both for manufacturers and for Hospital Systems, so there’s discussion for reform. On the other hand, there are numerous proposals against the drug shortage in Congress, with this being a bipartisan movement. The Senate Finance Committee has been recommending some ideas on how to empower the Secretary of HHS to empower everyone in the supply chain with incentives to limit the number of drug shortages. Political Momentum is important in solving this issue.

3. Mark McClullen

Mark is the director of the Duke Margolis Institute for health policy. Duke Margolis formed a Consortium last year on drug supply chain and resilience and a advanced manufacturing last year. All the recommendations made beforehand builds on already existing programs: the FDA already has a team that monitors the supply chain to address the shortages, which mostly commonly occur with generic drugs that are hard to manufacture.

Shortages have been occurring for many years, but attention is being brought to them now because of the record number of pressures from drug spheres and politicians. Also, during shortages, the drugs are staying cheap, which doesn’t allow manufacturers to recover/ sustain. The rigid process in which FDA standardizes drugs is not profitable for these manufacturers to invest in the reliability so these drugs will be consistently supplied. More clarity about reliable manufacturing can be gained through an FDA program such as a quality management maturity program to improve drug quality.

The availability of reliability and quality of manufacturers and their supply chains and the normalization of purchasing for reliability can be seen within Civica Rx, a pharmaceutical company established by hospitals and philanthropic organizations. Civica Rx is committed to manufacturing and supplying drugs that are often in shortage and are most used in hospitals. This even saves the hospital money in the long term. The current fail-fix mentality needs to be replaced with a preventative mentality when it comes to drug shortages.

Mark mentioned that tax incentives for reliable manufacturers is an option worth pursuing as well. Of course, demand is necessary for reliability so that reliable manufacturers are rewarded with business. Mark finished by urging passage of anti-drug-shortage bills in Congress.

4. Panel

This panel consisted of Heather Zenk (Pres of US Supply Chain Cencora), Michael Kleinrock (Research Director in IQVIA Institute for Human Data Science), and Marta Wosinska (Senior Fellow on the Center of Health Policy).

Shortages occur because of a big dominant market share player making a poor business decision (such as being shut down after an inspection). Shortages include drugs being moved to the wrong spot; volume of supply actually go up but be transferred to larger hospitals who need the drugs more.

There are 2 kinds of shortages- existing shortages and potential shortages. The Senate Finance Bill addresses existing shortages, 63% of which are generic sterile injectables. Potential shortages include supply issues from around the world, particularly pertaining to APIs. DC policy makers need to come up with and pass strategies to avoid future shortages. The MAPS Act is a good example of an Act against potential shortages.

Coordination and collaboration are what the distributor community specializes in, streamlining the supply chain, providing access for multiple sites of care pertaining to diverse communities. Fair Share Allocation is used to make available make available to multiple sites of care as much inventory as possible instead of putting it into specific large density areas.

Buffer inventory strategies (storing a surplus of inventory) were in place before the shortages, but they were used up quickly. Distributing the buffers can be a challenge and lead to disparities- the hospitals with more resources will have more inventory. A buffer inventory is different from and likely more applicable than a stockpile; with a buffer inventory, a wholesaler will hold a high level of inventory on hand and with a “first-in-first-out” system, no product expires, and shocks are alleviated. However, buffer inventories are expensive to maintain, so they may require government subsidizing. Also, buffers are more environmentally friendly as well.

Mr. Kleinrock denounced onshoring and revealed the flaw with generic drugs. After the brand-name drug’s patent ends, the cheap generic drug is introduced and is typically popular, yet years down the line, the generic drug is making no money. Generic drugs make money by feeding on slightly higher prices as the drug erodes, and these companies can’t make more drugs after their older generic drug stops making money, causing shortages.

Two government administrations may contribute to vulnerability in supply chains. First, the Drug Enforcement Administration (DEA) has not allowed the quota for drugs to rise (because of concerns about abuse), which hinders the supply chain during shortages. Second, Medicaid inflation rebates stand in the way between hospitals and manufacturers, eliminating transparency, which is harmful in a shortage.

(from left to right: Zenk, Kleinrock, and Wosinska)