AHA Recommends Steps for Congress to Take to Mitigate Drug Shortages

Feb. 8, 2024
Strengthening inventory systems within the supply chain in order to respond to demand spikes is an emphasis

The American Hospital Association (AHA) has released comments made before the U.S. House Committee on Ways and Means regarding chronic drug shortages in the U.S. They outlined three root causes for drug shortages and six suggestions for legislation to protect the supply chain.

The AHA stressed in its introduction that “drug shortages result in at least $359 million annually in additional labor costs to hospitals…on top of the estimated $200 million annually that hospitals and health systems spend paying higher prices to acquire alternative therapies.” Plus, the complexity of the pharmaceutical supply chain, which includes “suppliers, manufacturers, distributors, and group purchasing organizations” makes it so that any minor disruption anywhere in the chain can create “prolonged difficulties.”

The first root cause for drug shortages, according to the AHA, from information from the Food and Drug Administration’s (FDA) Drug Shortages Task Force from 2019, are “lack of incentives to produce low margin drugs.” Price competition and high investment requirements stymie manufacturers of older generic drugs from lowering costs. Another root cause is that “the market cannot identify and preferentially buy from those with better quality management practices.” Purchasers have “limited information to assess the state of quality management of any specific drug manufacturing facility,” which “does not enable the market to reward drug manufacturers for mature quality management…nor does it penalize manufacturers that fail to invest in modernization.”

A third root cause is that “logistical and regulatory challenges make it difficult for the market to recover after a disruption.” The aforementioned complexity of the pharmaceutical supply chain hinders the market’s ability to bounce back. Plus, companies that want to “increase production” may find themselves having to “obtain approvals from multiple different national regulatory bodies.”

In turn, the AHA emphasizes that “strengthening the supply chain is crucial” to mitigate these challenges. To that effect, it suggested six possible areas for Congress to legislate.

The first suggestion is to “diversify manufacturing sites as well as sources of critical raw materials to ensure supply chain sustainability.” Specifically, the AHA recommends expanding the number of countries the U.S. relies on to manufacture pharmaceutical products – it currently relies heavily on China and India – and bringing some of that production onshore. Another suggestion is to “increase end-user inventories and incentivize additional cushion.” Having a complex inventory system could prevent shortages by fostering transparency regarding supply.

Another suggestion is “requiring the FDA to develop ratings of the quality management processes of drug manufacturers…and make these publicly available.” Also, they suggest “requiring drug manufacturers to disclose to the FDA the locations where their products are manufactured” and “requiring drug manufacturers to notify the FDA of unusual spikes in demand of essential drugs.” Finally, the AHA suggests “requiring the FDA to identify those essential drugs…that should have increased domestic manufacturing capacity.”

The AHA’s website has the full statement.