The generic drug problem

For the past year, there has been an exceptionally severe dearth of generic medications available to Americans, forcing millions to ration or, in many cases, simply go without prescriptions. Surely, the pharmaceutical industry has not been immune from supply chain woes that have bedeviled virtually all aspects of the American economy. But such macro forces may not be the only culprit behind this pressing matter.

Earlier this month, the Federal Trade Commission (FTC) and the Department of Health and Human Services, behind the strong backing of the Biden administration, began assessing the role that drug wholesalers, those who purchase medications from manufacturers and disseminate them to providers, and corporations purchasing medicines for hospitals and health care providers – otherwise known as group purchasing organizations (GPOs), the most prominent of which include Vizient, Premier and HealthTrust — have had in this historic shortfall of generic prescriptions. The FTC and Department of Health and Human Services were particularly interested in learning more about the business practices to determine whether such middlemen in the pharmaceutical drug supply chain industry have disincentivized rival drug suppliers from competing in generic markets and compelled manufacturers to halt production.

In an exclusive interview with CNBC, Doug Farrar, director of the FTC’s Office of Public Affairs, remarked, “The FTC is interested in looking at this market because on one side of the market, you have patients that are desperate for the right drug and would pay a very high price for that drug if they could. And on the other side of the market, you have manufacturers that can’t get more than a few dollars per dose of that same drug.”

Meanwhile, it also should be mentioned that in conjunction with their campaign to reduce the cost of prescriptions, lawmakers have pushed for heightened transparency from pharmacy benefit managers (PBMs), entities that negotiate discounts for insurance companies and other payors about their contracting practices. PBMs, however, offer that manufacturers are accountable for elevating drug prices while manufacturers, in turn, contend that rebates and fees acquired by PBMs compel them to raise market prices for products.

The shortfall of generic drugs, which comprise the majority of medications that Americans consume, has been a chronic problem, starting well before the mid-2020s. However, it has worsened significantly over the past year and the Biden-Harris administration wants to hold the pharmaceutical middlemen accountable – or at least compel them to be more transparent with their decision-making. After all, core chemotherapy drugs, cisplatin and carboplatin, critical for treating lung, breast, testicular, ovarian and head and neck cancers, fall under the category of generic drugs. Ones that are in major shortage at this hour.

“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 in a release from the agency on February 14, the day that the Request for Information was issued (the pertinent entities have 60 days to submit written comments, documents and other data). “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.”

Related: What’s behind the drug shortages? Lawmakers seek answers from the FDA

In describing the predicament that patients face, “vulnerable” is not an exaggeration. Inadequate supplies of generic drugs can have severely adverse effects on patient care, whether it be treatment delays, heightened risk for medication errors, or the need to resort to far less effective alternative prescriptions (which in many cases can be exorbitantly costly for the hospital and/or patient, particularly when it involves cancer treatment). Subsequently, many illnesses that would otherwise be curable with proper medication become far more difficult to manage, often jeopardizing patients’ chances of survival. Indeed, over the past year, physicians have acknowledged that they have needed to ration chemotherapy medications and make life-and-death decisions regarding which patients to prioritize treating.

Tragically, there is indisputable evidence supporting such a dynamic: per an official report from the White House, fifteen different cancer medications were in shortage in 2023 as a result of manufacturing and supply chain issues – many of which apparently stem from perceived monopolistic behavior in the pharmacy marketplace.

David Ostrowsky serves as a Content Specialist for The Phia Group, one of the country’s leading health care cost containment companies.