How races to the bottom spur drug shortages

Chronic drug shortages are difficult to resolve because of multiple races to drive down prices on generics, The New York Times reported Dec. 19. 

When a medication falls into shortage — which can happen because of high demand, quality control issues, its main supplier closing up shop or other reasons — there's little incentive for other drugmakers to pick up the pace. More than a dozen current and former executives in the generic drug industry told the Times there are many risks with suddenly increasing production. 

Prices of the most common critical drugs are very cheap. For instance, cancer drug mainstays carboplatin and cisplatin, which have been in shortage for months, cost about $15 per dose. 

More than 200 drugmakers are competing to snag contracts with the nation's three biggest group purchasing organizations that act as gatekeepers. To beat their rivals, companies offer rock-bottom prices, which are sometimes negotiated even lower days after signing a contract with a GPO. 

Intas Pharmaceuticals, a subsidiary of Accord Healthcare that manufactures generics in India, trounced competitors over the last few years by lowering its drug prices. Its market share swelled. Then, in early 2023, the FDA halted importations from one of its sites after uncovering quality control issues

A "supply shock" was felt across the U.S., the Times reported, as Intas' cisplatin market share in the U.S. grew from 24% in 2018 to 62% in 2022. 

GPOs have battled among one another to gain hospital clients; and to win the upper hand, they're pushing for lower prices from their contracted drugmakers, according to the Times. Generic pharmaceutical companies face high fines if they don't make enough supply, and if they have a surplus, they lose needed profits. 

Todd Ebert, president of the Healthcare Supply Chain Association, which represents GPOs, said some generic drugmakers offer cheap, "predatory" prices to beat their competitors.

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