Every year, U.S. hospitals spend at least $600 million to mitigate drug shortages, according to HHS. On April 2, the department proposed financial incentives for hospitals with resilient drug supplies.
In an 18-page policy recommendation, HHS recommended a Manufacturer Resiliency Assessment Program and a Hospital Resilient Supply Program. The programs, which HHS defined as long-term solutions, would assess and rank drug manufacturers based on their reliability.
Hospitals would then be rewarded for buying drugs from diverse and reliable suppliers.
Depending on a company's scorecard, CMS could hand incentives or penalties to drugmakers, hospitals and middlemen. The current system prioritizes low costs, but some experts argue cheap generics deter pharmaceutical companies from investing in protecting those manufacturing lines, such as resiliency plans.
The federal government wants to "address the market failure that currently exists, which is that there is no entity that's accountable to [the] supply chain," Neera Tanden, a White House domestic policy adviser, told Bloomberg. "Today when we have a drug shortage, various entities within the healthcare system point to each other."
The suggested scorecard would rate hospitals on their inventory management practices, including stockpiling or buffer stocks; and contract practices with middlemen, such as having effective failure-to-supply clauses, minimum purchasing volume requirements and long-term contracts.