FTC launches probe of drug supply middlemen in worsening generic shortage

Several generic drugs are in short supply, and the Federal Trade Commission wants to know why.

“For years, Americans have faced acute shortages of critical drugs, from chemotherapy to antibiotics, endangering patients,” FTC Chair Lina Khan said. “Our inquiry requests information on the factors driving these shortages and scrutinizes the practices of opaque drug middlemen.”

The agency is investigating whether companies that broker drug purchases for hospitals, along with the middlemen that ship the medicines, have misused their market power to push down prices of generic drugs so much that some manufacturers are unable to make a profit and stop production, which leads to shortages. In a public request for information, the FTC is asking about the drug distributors and hospital purchasing groups and their contracting practices,

Three groups (Vizient, Premier and HealthTrust) purchase drugs on behalf of most hospitals in the United States, while the three leading wholesaler (Cencora, Cardinal Health and McKesson)  supply about 90% of drugs to hospitals and other buyers across the country. Trade associations deflect the blame elsewhere:

• The Healthcare Supply Chain Association, which represents hospital purchasing groups, has blamed shortages on manufacturers’ quality problems and said the groups work with hospitals to manage shortages and increase the number of drug suppliers.
• The Healthcare Distribution Alliance, which represents pharmaceutical distributors, has said shortages occur because of many factors, including drugmakers having trouble finding raw materials or sharp spikes in demand. It has said its members work to minimize disruptions.

Insufficient supplies of critical chemotherapies forced doctors to ration supplies last year and intensified attention on periodic shortages of various generic drugs. Many patients weren’t able to get generics of the chemotherapy drugs carboplatin and cisplatin, forcing them to go longer between treatments or turn to alternatives.

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The group purchasing organizations help hospitals control costs by negotiating better rates. However, some doctors, patient advocates and generic drugmakers say the groups have used their power to force the manufacturers to cut back production or exit the business altogether. The limited number of companies producing the drugs makes the supply chain even more fragile and shortages more likely in the event of a natural disaster or production line issues.

“When you’re prescribed an important medication by your doctor and you learn the drug is out of stock, your heart sinks,” HHS Secretary Xavier Becerra said. “This devastating reality is the case for too many Americans who need generic drugs for ADHD, cancer and other conditions. Today’s announcement is part of the Biden-Harris administration’s work to tackle health-care monopolies and lessen the impact on vulnerable patients who bear the brunt of this lack of competition.”