Reimbursement Precipitating Shortages

In June 2023, FDA Commissioner Robert Califf ascribed most drug shortages to “generic-drug companies going out of business, either because they fail to invest in quality operations or because they can’t make a profit, as hospitals and pharmacies seek lower prices” (1). Chris Spivey, editorial director of Pharmaceutical Technology®, wrote about Beyfortus being in shortage partly because of unanticipated high demand, but also pediatric practices. Unsure of reimbursement timelines and amounts, it experienced a vaccine hesitancy of the financial kind. Pediatric practices didn’t want to hold on to lots of $500 a shot doses (2).

On Dec. 5, 2023, the US Senate Finance Committee held a hearing on drug shortages. Marta Wosinska, senior fellow at the Brookings Institution, testified that generic sterile injectable (GSI) drugs represent about half to two-thirds of all shortages. GSI shortages result from how hospitals buy GSI drugs, and the underinvestment in manufacturing operations that follow. Wosinska stated GSI shortages result primarily from “manufacturing quality problems at facilities where the final product is made, often in the United States … What is vexing about those shortages,” she continued, “is that they are largely avoidable. All payers, including Centers for Medicare and Medicaid Services (CMS), reimburse hospitals in ways that give them incentives to use the lowest-priced GSI drug available … The price pressures put on manufacturers create a dynamic where there is little room for—or little return on—investing in manufacturing facilities, staffing, and oversight. [GSI drugs are hard hit] because making those drugs requires specialized facilities where employees follow complex manufacturing processes and controls. If we want to address the persistent GSI drug shortages, CMS will need to pay hospitals differently, incentivizing them to consider reliability of supply in their purchasing decisions … CMS does not have the authority to set up such a program, especially one that is not budget neural. This Committee however can grant that authority” (3).

References

1. Wechsler, J. Drug Shortages Continue to Plague FDA and Manufacturers. Pharm. Technol. 2023 47 (7).
2. Spivey, C. Why We Were Not Properly Winterized for RSV Season. PharmTech.com Nov. 24, 2023.
3. Wosinska, M. Testimony before the Senate Finance Committee, December 2023.

About the Author

Mike Hennessy Jr. is the President and CEO of MJH Life Sciences.

Article Details

Pharmaceutical Technology

Volume 48, No. 1

January 2024

Page 10

Citation

When referring to this article, please cite it as Hennessy, M. Reimbursement Precipitating Shortages. Pharmaceutical Technology 2024 48 (1) 10.