How to Address America’s Historic Drug Shortage Crisis

The United States is facing an unprecedented drug shortage, with a record 323 active drug shortages at the start of 2024 — the highest number since 2001. Two major factors are driving this crisis: foreign government subsidies and regulatory failures by the U.S. Food and Drug Administration.

America has become dangerously dependent on foreign manufacturers — particularly in China and India — for generic drugs that account for 91% of all U.S. prescriptions. In 2000, China and India accounted for 25% of the global share of active pharmaceutical ingredient filings. By 2021, India alone accounted for 62% of active filings, with China at 23%. Today, these two countries dominate the U.S. market, supplying the majority of our nation’s generic drugs.

Much of America’s current dependence on drug imports has been driven by the Indian government’s massive subsidies for its generic pharmaceutical industry. It’s a major factor in the offshoring of domestic production, leaving the U.S. dangerously reliant on Indian drug factories that frequently violate FDA regulations.

The FDA’s failure to adequately inspect and regulate many of these overseas facilities has also exacerbated the drug shortage crisis. Despite finding numerous violations at foreign plants, FDA oversight remains inconsistent and insufficient. There is an alarming lack of regulatory oversight in India, which has caused serious complications in patients — and even deaths. Generic cough syrups from India have killed dozens of children, and other drugs have been contaminated or caused blindness.

Despite these serious problems, FDA inspections of overseas drug factories have actually declined steeply. In 2019, the FDA inspected 37% of nearly 2,500 overseas manufacturers. By 2022, inspections plummeted to 6% of roughly 2,800 manufacturers — including only 3% of Indian manufacturers.

The FDA’s inadequate oversight has created a regulatory loophole that allows foreign manufacturers to produce substandard drugs with minimal consequences. That’s now impacting U.S. patient safety since the FDA has no choice but to allow drug imports from non-compliant foreign manufacturers.

Last year, due to a national cancer drug shortage, the FDA permitted Chinese drug manufacturer Qilu Pharmaceutical to ship an unapproved cancer drug to the United States. It also allowed a banned Indian factory to ship the lung medication Atovaquone to the U.S.

Valerie Jensen, Associate Director for drug shortages at the FDA, recently warned that foreign manufacturers’ race-to-the-bottom price strategy is driving shortages. Imports of critical hospital products such as generic sterile injectables are now so cheap that it’s no longer profitable for domestic companies to continue production. FDA Commissioner Robert Califf has also warned about insufficient reserves of generic drugs in the U.S., urging a reassessment of the industry’s economics.

Congress must address these shortages in the generic drug industry. However, solving America’s drug shortage crisis requires more than a single solution — it demands a comprehensive approach.

First, there is an urgent need to rebuild domestic production of essential medicines. Senate Majority Leader Chuck Schumer (D-NY) has proposed a four-point plan that includes incentivizing domestic manufacturing and improving safety. Helpfully, the PILLS Act introduced by Congresswoman Claudia Tenney (R-NY) would accomplish that through a production-based tax credit, investment tax credits, and domestic content bonuses to encourage the reshoring of U.S. production of generic medicines.

In addition to boosting domestic production, Congress must also reform the FDA to ensure it can effectively oversee foreign drug manufacturers. This includes increasing the frequency and rigor of overseas inspections and closing regulatory loopholes that allow non-compliant manufacturers to operate with impunity. The FDA must also enhance its ability to obtain accurate information about pharmaceutical quality from foreign manufacturers.

Urgent action is needed to address America’s drug shortage crisis. By taking these steps, the U.S. can secure its drug supply chains and ensure that patients have access to safe, quality, and reliable medications.