Operation Warp Speed to end generic drug shortages
Washington knows what needs to be done but no one's doing it. We already have a template to get this done.
This weekend thousands of cancer patients awoke to a new angst, wondering if they can get a drug that could save their life. The drug isn’t beyond reach because it’s wickedly expensive. In fact, it’s decades old and cheap. The problem is it’s in very short supply.
The drug, carboplatin, is a tried and true part of chemo regimens for many cancers. And, it’s not the only one in short supply. A record number of drugs are, according to the FDA. Capecitabine, a breast cancer drug; cisplatin, another chemo drug; albuterol for asthma; clonazepam for panic disorders and epileptic seizures; dextroamphetamine for ADHD, and so on.
Last month, over ninety percent of the top US cancer treatment centers reported carboplatin shortages, with a third saying they’d had to change patient’s treatment plans. And that’s among the most well-connected hospitals in the country. Most cancer treatment happens in “community settings” where hospitals have far less access or resources. Cancer drug shortages may not kill immediately, but as a result, some will die sooner than they should have.
You’d think a severe shortage of life-saving drugs would be a stop-the-presses, people are dying kind of story. It got some coverage in late May (The New York Times, Wall Street Journal) but reporters seem to have moved on to issues like Merck’s lawsuit to stop Medicare drug price negotiations. It’s a pity, but also not a surprise. High drug prices are a sexy topic in Washington. Shortages of low-priced generic drugs much less so.
Some of this is because Washington has been here before. Generic drug shortages have flared up every few years, going back over a decade. There’s a great NIH examination of drug shortages from, wait for it, 2011. Much of it remains true today.
Generic drugs are not some small slice of the drug market. They ARE the market, as measured by prescription volume. Ninety percent of US prescriptions are for generics. Yup, only 1 in 10 medications prescribed are the branded ones we hear so much about. That’s a big reason why total prescription drug costs as a share of total health costs have stayed about the same over the last fifteen years.
It’s too harsh to say official Washington doesn’t care. More like, it’s paralyzed. In cancer treatment, Big Pharma, insurers, Medicare, and think tanks fight whether new targeted therapies are “worth it”, forgetting that many of the latest therapies should be taken along with tried and true generics like carboplatin. One without the other will be much less effective.
So Congress and the White House are dutifully getting stuck back in to … study the problem. Again. March brought a detailed Senate report on the causes of shortages with hearings before the House Commerce Committee in May. Earlier, in January, Health Affairs published a concise review of “best of” ideas to end supply shortages, authored by drug policy experts from Columbia, Boston University, Brookings, and University of Utah.
There is no lack of ideas, just action.
It’s not like the Biden Administration is unaware of the issue. A year ago the FDA issued guidance to drug makers to reduce supply chain risks. Its directive has gone unheeded; since then, shortages have only gotten worse.
As part of its first Hundred Days review of pandemic-related supply chain issues in critical industries, the Administration provided recommendations for semiconductors, energy storage, critical minerals, and drug supply. The chip industry got a bill. The green energy industry got a bill, a massive one. The generic drug industry, not so much.
This March, the Administration issued a set of “Bold Goals” to improve biotech and drug production. The section on improving drug supplies is underwhelming. One bold goal: within twenty years, yes twenty, the US should be able to respond to supply chain bottlenecks within a week.
Bloomberg reported in mid-May that a White House task force is working on the issue. The FDA says it lacks authority, beyond monitoring quality issues, to force supply chain fixes.
This is all, well, kind of weird.
We are just two years removed from Operation Warp Speed, one of the most successful efforts to kickstart and massively scale drug production during wartime. (Yes, COVID was wartime, a biological one but one nevertheless.) We learned, or should have learned, a great deal about getting drugs manufactured in an emergency. Foremost among these was: where there’s a will, there’s a way. There’s a time for dotting every “i” and crossing every “t” and there’s a time for … not. This is a time to get moving.
The generic drug market is freakishly broken. On the supply side, prices are too low and mangled by market intermediaries resulting in too few producers and too many single points of failure. Yet, on the other, insurers and consumers end up overpaying for many generics! Try to find that scenario in an economics textbook.
As has happened in many other industries, since the early 2000’s, manufacturing of widely-prescribed drugs has gone offshore as drugs go off patent. Most of the key chemical ingredients are also made overseas, in China and India in particular. This has made the FDA’s job of ensuring quality products much harder.
Normally that wouldn’t be that big a deal. If something’s in high demand other producers will jump in, right? Well, not in the US generic drug market because between drug makers and pharmacies and hospitals sit a cartel of drug purchasers, called PBMs. They got their first unpleasant moment in the spotlight during the pandemic as insulin prices skyrocketed.
PBM’s essentially control the generic drug market, often picking sole-source suppliers for a particular drug. Winner-takes-all auctions make perfect economic sense until that provider has a supply chain or quality hiccup, which happens more than anyone would like. Contamination and quality issues take time to fix, especially in older production lines. A plant can be offline for months. It’s hard for other drug makers to step in since, having lost the ability to supply the US market, they have not made the investment to set up production lines that meet FDA quality standards.
So how do we fix this, quickly?
Operation Warp Speed provides the template.
First, expectations. No one doubted what the words “warp speed” meant. It was a little corny, and many involved, especially at the outset, weren’t sure exactly how we could produce massive volumes of new kinds of vaccines at scale. Too bad. This was a war against time. And that urgency set the tone.
Second, leadership. No one’s in charge, or seemingly wants to be in charge. Not the White House -- at least not yet. Not the HHS or the FDA. And Big Pharma? Good luck. They’ve left the building. Operation Warp Speed fumbled out of the gate in late spring 2020. So in came two experienced hands to lead the science and the logistics, the former head of a major vaccine maker and a logistics expert from the Defense Department. Authority and accountability were clear.
Third, make a market. Operation Warp Speed succeeded in large part because the government took away most of the financial risk for vaccine makers to invest, quickly, massively, in new production facilities. We need that, on generic drugs, too, at least for a time. Make quality doses and do it fast. Guarantee to buy a minimum volume of key drugs at a reasonable price to those who ramp-up, and maintain on-shore production capacity.
It goes back to those Hundred Day supply chain reviews, what we’ve done for decades on military technology, and are now doing for computer chips and green energy. Do not depend on the kindness of strangers to make enough of the things we need to live and thrive.
The good news is that the dollar commitments to produce critical generic drugs will be vastly less than what was required for COVID. It’s also an opportunity to build in supply flexibility and redundancy by design. New manufacturing approaches should enable production lines to shift from making one drug in short supply to another fairly quickly. The Mark Cuban Cost Plus Drug Company is building an initial proof of concept facility in Dallas now. So the government support would not only be a volumetric commitment, but also require drugmakers to build redundancy in key ingredient suppliers, locate critical production steps in the US, and ensure production lines can make multiple drugs.
Still, if we entice more companies to invest in new technologies to make generic drugs and ensure supply redundancy, won’t total generic drug costs go up? Yes, production costs will go up, but that doesn’t mean that prices paid by pharmacies and insurers have to go up too.
This goes back to the role of PBM’s. Much of the gap between the price PBM’s pay generic manufacturers and the price they receive is created by a dizzying array of subsidies and kickbacks that would befuddle even the most sophisticated mob boss.
This is the “behind the curtain” craziness that spurred creation of the Mark Cuban Cost Plus Drug Company into existence. Their goals are to cut PBM’s out of the middle, thereby exposing their rent-seeking and extortionate practices. They are a welcome catalyst for reform, but they cannot do it alone. It will require government support, leadership, drive, and yes, transparency. As part of the drive to create more robust supply we can also squeeze out the gap to final sales prices, keeping total spending on generic drugs under control.
George Merck, founder of Merck Inc. had a great credo: “We try never to forget that medicine is for the people. It is not for the profits.”
Clearly in the generic drug market at least, some have forgotten exactly that. So it’s time to try harder, a lot harder. We know how to solve this, and quickly. Lives are at stake.