Senate drug shortage bill zeroes in on supply chain, would pay hospitals to 'stockpile'

With drug shortages at an all-time high in the United States, the Senate Finance Committee has introduced the Medicare Drug Shortage Prevention and Mitigation Program, which would encourage improved contracting and purchasing practices in the drug supply chain.

“Our bipartisan proposal uses the power of Medicare and Medicaid to ensure the entire American health-care system has adequate supply for key medicines across the country,” committee Chair Ron Wyden, D-Ore., said. “Middlemen like group purchasing organizations should not be able to do business with Medicare if their contracting practices are actively worsening the drug shortage challenge in America.”

The proposed legislation would require Medicare participants to adopt new standards for supply chain resiliency reliability and transparency for generic drug purchasing to receive Medicare payment incentives. These standards would include minimum three-year contracts with manufacturers, purchase volume commitments, requirements for contingency contracts with alternate manufacturers and transparency around manufacturer quality control issues. Providers who meet core standards would be eligible for quarterly lump-sum incentive payments.

Because generic drug manufacturers work with thin margins, it puts pressure on them to often operate at capacity. This practice, however, leaves generic drugs particularly vulnerable to shortages when disruptions occur. “Addressing the generic drug shortage crisis in Oregon and across America is urgent business,” Wyden said.

During the first three months of 2024, 323 drugs were in short supply, according to the American Society of Health-System Pharmacists and the Utah Drug Information Service. The previous record high was 320 shortages in 2014.

“All drug classes are vulnerable to shortage,” said Dr. Paul Abramowitz, CEO of the society. “Some of the most worrying shortages involve generic sterile injectable medications, including cancer chemotherapy drugs and emergency medications stored in hospital crash carts and procedural areas.”

Last year, the American Cancer Society warned that chemotherapy drugs had returned to the list of the top-five drug classes. Commonly prescribed drugs such as Adderall and Albuterol have been in short supply since 2022.

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“Prescription drug shortages are fueling high prices and limiting access to life-saving treatments and cures,” said Sen. Mike Crapo, R-Idaho, ranking member of the committee. “We look forward to working with other members, experts and stakeholders on addressing these life-threatening challenges and promoting consistent, cost-effective health care for Americans nationwide.”

If enacted, the program would begin in 2027.