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Key changes in the generics industry could prevent drug shortages

The growth of the generics market has produced impressive economic benefits for the United States. The Association for Accessible Medicines (AAM), recently reported that the use of FDA-approved generics and biosimilars saved $408 billion in healthcare costs just in 2022. With more than 90% of U.S. prescriptions being filled with generic formulations, the occurrence of shortages is not a surprise. That being said, the intensity and length of these shortages have become worrying. According to the American Society of Health-System Pharmacists (ASHP), 99% of pharmacists who work for hospitals or health systems reported that they were currently facing drug supply issues.


One of the reasons behind the surge in shortages is the dependence on manufacturers based in India and China. While it is true that production in these countries can be achieved at lower costs, this might come with a hefty price. Beyond delivery delays due to geopolitical disruptions and quality issues, depending on a single country to source a certain generic is the pharmaceutical equivalent of placing all eggs in a single basket.

A smarter approach to leveraging costs by outsourcing pharmaceutical manufacturing is to split production across different companies that are regulated under the same criteria. Such is the case of pharmaceutical manufacturers based in the European Union, which have to fulfill the same quality standards as member nations. For this strategy to work, it is important to choose partners who fulfill European standards, comply with FDA regulations, and are capable of ensuring quality across batches.


Another reason behind the increasing number of drug shortages is the lack of incentives regarding sourcing generics based on factors that go beyond production costs. If a generic manufacturer, chosen by offering the lowest price, has to stop production due to quality concerns, it will logically lead to a shortage. Thus, it is necessary to push for incentives that stimulate companies to hire manufacturers that do not cut corners and offer quality services. Such incentives could be managed through federal programs such as Medicare.


By promoting picking manufacturers based on quality, reliable manufacturers could find funding more easily, invest in their facilities, and even expand their portfolio to sell less popular drugs. The industry is open to putting quality over price, as 85% of ASHP survey participants would be willing to spend 5% or more above their annual generic injectable drug budget to buy from more suppliers that achieve quality recognition.


A 2019 FDA report identified the lack of quality recognition in the pharmaceutical industry as a root cause of drug shortages. The idea of a quality recognition program for drug manufacturers was introduced in a 2013 article written by FDA staff and published in Clinical Pharmacology & Therapeutics. For the FDA, establishing quality metrics or rating systems for manufacturers would be a challenge but doing so would provide more objective support to purchasing choices.


Another measure that can be taken to prevent shortages is to request additional reporting when demand for a certain formulation surges, increase the required reporting regarding the source of active ingredients, and require manufacturers to study the longest possible expiration date of their products. Pharmaceutical analysts could use this information to track (and potentially predict) the availability of different drugs and their active ingredients to act upon any emerging issue without allowing it to spiral out of control.


By investing in diversifying sourcing, increasing quality, and data tracking, it is possible to prevent drug shortages in the expanding generics market. These activities are quite feasible, with the biggest challenge being how long is society willing to wait before investing in preventing the next drug shortage crisis.




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