The American Drug Supply’s Biggest Problems, And How To Fix Them.

Coalition vice presidents explain the FDAs shortcomings and why U.S. medicines are often in short supply in a new American Affairs Journal article.

For years, the Food and Drug Administration has had to balance drug supplies with drug safety, and supply concerns almost always won out.  Despite this, dozens of life saving medicines are in perennial short supply. 

Congress knows this. Hardly a year goes by without the House and Senate taking up the issue in hearings. Some blame the pharmaceutical supply chain itself, and the middle men who act as brokers between pharmaceutical companies and pharmacies. Others blame our dependence on foreign labs for generic drugs, which is what most Americans take when on prescriptions, and are the drugs that usually populate the FDA shortages list.

CPA has made the supply woes of critical, generic pharmaceuticals a core tenet of our reshoring philosophy. In a long article published in American Affairs, a political journal, CPA Communications Director Nick Iacovella and Government Affairs Senior Vice President Jon Toomey gave a long explainer of the problems we face, and the solutions required.


>> See full article here. <<


Drug Dependency

Americans take 131 million prescription drugs each day, and generic medicines account for roughly 90 percent of all prescriptions dispensed in the United States.  The big brand name drugs drive profits for pharmaceutical giants like Pfizer, but generic drugs, which sell for roughly $20 on average, are critical to our nation’s health care system and more than a hundred million patients every day. These are drugs as basic as anesthetics and penicillins like amoxicillin, which is constantly in short supply.  

Unfortunately, the United States is dangerously dependent on foreign manufacturers—particularly in China and India—for essential, lifesaving generic medicines. In recent decades, U.S. domestic production of generic pharmaceuticals has been offshored to China and India. Subsidized foreign manufacturers have sought to eliminate U.S. competition by racing to the bottom in price, only to drastically increase prices and gouge American patients once they have monopolized a product. 

CALL OUT: Currently, the United States is reliant on imports for at least two-thirds of our generic medicines, and nearly 90 percent of generic active pharmaceutical ingredient (API) facilities are overseas. The majority of those supply chains run through China and India. China, in particular, has a strong hold on the production of API and key starting materials (KSMs). In 2021, China was the leading source for U.S. pharmaceutical imports measured by weight, accounting for 418 million pounds, or 23 percent of total pharma imports.

China has made biotechnology, which we can assume means all pharmaceutical labs, a key part of its Made in China 2025 program. Even though the bulk of that will be for new, patented drugs, it is safe to assume that China will position itself as a haven for contract manufacturing of drugs made by Western pharmaceutical companies, or over produce popular generic drugs like some of those listed above in order to under-price the competition both here, and even in India.

Existing Infrastructure Not Helpful

Group Purchasing Organizations (GPOs) and Pharmacy Benefit Managers (PBMs), which act as middlemen in the purchasing market, have also contributed to the drug shortage crisis. Congress has spent hours debating this side of the business. GPOs and PBMs are focused on maximizing returns without regard for other considerations like safety and quality. While their efforts to secure the lowest drug prices aim to cut costs, they have contributed to the offshoring of generic drug manufacturing.

Since the 1960s, PBMs have acted as intermediaries between drug manufacturers and pharmacies, handling both brand name and generic drugs. As prescription drug spending surged, PBMs consolidated, leading to just three companies—CVS Caremark, Optum Rx, and Express Scripts—controlling 80 percent of the prescription drug market. This market dominance gives PBMs significant buying power, allowing them to negotiate substantial discounts from manufacturers for favorable inclusion in insurance policy formularies. The PBM model succeeded in driving down prices far enough to push U.S. generics producers out of the market, but it has not been effective at controlling price volatility driven by foreign monopolies, or addressing regulatory differences and quality issues.

A recent NPR interview with Valerie Jensen, associate director for drug shortages at the Food and Drug Administration, documented how foreign drug manufacturers racing to the bottom in price are having unintended consequences—including increasing drug shortages. The report found that “when it comes to generic sterile injectables, medicines that are workhorses in hospitals, the opposite problem is true. They can be too cheap. Companies compete with each other to offer hospital purchasers the lowest price, driving the prices to rock bottom. Over time, prices can get so low that it doesn’t always make good business sense for the companies to keep making some drugs. So they stop.”

America’s Medicine Cabinet: Made in India

India is our single largest source of generic medication. Subsidies and other tax incentives there will help keep it that way.

The Indian government provides a variety of subsidies that have been found, in prior countervailing duty cases in the United States, to result in a countervailable subsidy. Most Indian pharmaceutical companies that export take advantage of a handful of subsidy programs, and the Indian pharmaceutical industry widely advertises its use of subsidies. 

Such benefits include the reimbursement of 100% of actual filing costs on domestic patents and 50% of actual filing costs on international patents . . . and reimbursements up to 75% of the total cost to take a drug through clinical trials.

India pharmaceutical companies benefit from at least six separate export schemes, as well. This makes them hyper-competitive. The U.S. consumer gets lower drug prices, but there is often a catch…

Supply Over Safety

Despite FDA inspectors finding an increase in significant violations at Indian facilities, the FDA does not come close to inspecting labs there at the pace and consistency they do here.

For example, in India, where the contaminated eye drops fiasco originated, the FDA inspected only 3% of manufacturers in 2022—significantly less than in 2019, when 45% of plants were inspected. They blamed Covid policies. Some Americans died as a result. 

Last year, the FDA was forced to allow Chinese drug manufacturer Qilu Pharmaceutical to ship an unapproved cancer drug to the United States due to the national cancer drug shortage. The drug, cisplatin, is a widely used chemotherapy drug.

The FDA allowed a banned factory in India to ship the lung medication Atovaquone to the United States, too. This repeated pattern by the agency has become essentially a pharmaceutical offshoring policy by the FDA, which says they have to consider supply constraints along with safety, and often will err on the side of supply.

The FDA ignores the need to boost domestic production and approves foreign manufacturers that repeatedly violate safety regulations.

In June 2022, FDA inspected a Glenmark lab in India. They were issued a Warning Letter and had some of their products barred entry into the U.S.

Yet, despite these violations, the FDA provided an exception to Glenmark in January, enabling it to supply Atovaquone oral suspension to the U.S. market from the same lab that got the Warning Letter.

Last year, the FDA issued a Warning Letter to Indian pharmaceutical giant Aurobindo. It’s not the first. 

Despite multiple Warning Letters and more than a dozen recalls for unsafe or substandard drugs, instead of placing Aurobindo on import alert, testing its products, and finding alternative suppliers, the FDA has instead continued to reward Aurobindo with countless first generics—the first approval FDA permits which allows for a period of exclusivity in sales.

Legislative Fixes

The article looked at legislative fixes to the problem. 

Part of Senate Majority Leader Charles Schumer (D-NY) legislative plan is “incentivizing domestic manufacturing and onshoring” and “improving production safety and quality.” Boosting domestic production of generic medicines would be a critical first step in addressing the drug shortage crisis. One bill stands out.

For CPA, that’s Rep. Claudia Tenney’s (R-NY-24) PILLS Act. Her bill is the best solution circulating Congress so far. If passed, the Act would incentivize the strategic reshoring of U.S. domestic production of generic medicines with a domestic production-based tax credit, domestic content bonus credit, and an investment tax credit.

In a hearing earlier this month by House Ways & Means, experts providing testimony said the problem with drug shortages was due in large part to the voluntary recalls at foreign labs and a “race to the bottom” on drug prices as India and China try to outcompete each other, aided by their governments. 

This means solutions to the domestic drug problems either rely on changes in foreign practices that are out of U.S. control; a change in the business model among purchasing organizations; or actions by Congress to encourage local pharmaceutical companies to eradicate these issues with the help of tax and investment incentives. 

At the hearing, Dr. Stephen Schleicher, Chief Medical Officer at Tennessee Oncology, summed it up nicely:  “Common sense tells me that shortages of inexpensive generic drugs must be tied to the lack of incentives for drug manufacturers to produce these. I implore congress to act to stop these drug shortages.”


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