House Committee on Oversight and Government Reform Report: FDA’s Contribution to the Drug Shortage Crisis

The issue of drug shortages has been at the forefront over the past several months and earlier this year, FDA issued Guidance to industry regarding notification of drug shortages.  The number of drug shortages has been rising steadily over the last five years, nearly tripling from 61 in 2005 to 178 in 2010.  In 2011, FDA tracked over 250 drug shortages. The drugs in shortage are mostly generic injectable medications, many of which have been on the market for decades. 

A new report from the House Committee on Oversight and Government Reform documents a critical shortage of generic injectable medications that has occurred following enforcement activity by the Food and Drug Administration (FDA) at companies and facilities where the drugs are made.   

Chairman Darrell Issa (R-CA) said the Committee has learned that FDA regulatory activity has effectively shut down 30% of the total manufacturing capacity at four of the country’s largest producers of generic injectable medications.  In response to FDA action, companies that produce generic injectable drugs have taken their manufacturing off-line simultaneous to other generic competitors doing the same.  Of the 219 drugs listed on the American Society of Health System Pharmacists (ASHSP) shortage list as of February 21, 2012, at least 128 – 58% of the drugs on the shortage list – were produced by at least one facility undergoing FDA remediation.  

The report is the result of an ongoing examination conducted by The Committee.  It found that since 2010 when the shortage crisis began, Commissioner Margaret Hamburg and the agency have failed to ensure that ongoing enforcement is conducted in a manner that does not create unnecessary shortages or have unintended consequences.  

“Among shuttered manufacturing lines that occurred over the two previous years, the Committee’s review did not find any instances where the shutdown was associated with reports of drugs harming consumers,” Chairman Issa said. 

“It is also important to note that the overall damage inflicted by the FDA’s decisions to shutter manufacturing lines may extend well beyond the current drug shortage crisis.  This shortage of injectable generic drugs is only the most visible result thus far of FDA enhanced enforcement action,” Chairman Issa added. 

“This shortage appears to be a direct result of over aggressive and excessive regulatory action.  Addressing this shortage requires a common sense regulatory approach that considers market conditions and the overall impact,” Chairman Issa said.  “These drugs can save lives and keep people who need them living healthy lives.  The FDA is failing to ensure the availability of quality products.” 

Report 

An article from Forbes attributed drug shortages to the “aggressive” FDA that Commissioner Hamburg runs.  In 2010, Hamburg’s officials issued 673 warning letters to drugmakers and other companies: a 42 percent increase from 2009.  In 2011, the agency issued 1,720 warning letters: a further increase of 156 percent. This aggressive pace led four of America’s five largest manufacturers of generic injectable drugs—Hospira, Teva, Bedford, and Sandoz—to “simultaneously take significant production off-line in order to deal with FDA warnings.  As a result, their production of generic injectables declined by 30 percent, contributing to a massive shortage.”

“Pharmaceutical companies, despite running available production lines around the clock, are now forced to decide which drugs to continue producing and which to stop producing, and whether to cease production temporarily or permanently,” Issa writes.

Scott Gottlieb, a former deputy commissioner of the FDA, testified to Issa’s committee that the FDA went overboard in its enforcement.  “Instead of calling for targeted fixes of troubled plants, the agency has often required manufacturers to undertake costly, general upgrades to facilities. As a result, in 2010…regulatory actions taken by the FDA to address these problems were involved in 42 percent of the drug shortages.” 

Issa’s investigators found that a big part of the problem was that the FDA’s inspectors were not required to consider the broader effects of their actions. “According to sources with inside information about FDA’s operations, there is a disconnect between the FDA field force, the inspectors who work out of the agency’s district offices, and scientists and other career individuals at FDA headquarters who work on review and compliance functions,” Issa writes. “According to the Committee’s sources, FDA’s field force does not believe that it is within the scope of their authority to worry about the implications of their actions, even if it means a manufacturer closing a facility or removing manufacturing lines from production.” 

FDA released a statement in response to the House Report, which noted that preventing “drug shortages is a top priority for the” agency.  FDA pointed out that more than 150 shortages have been prevented since the Executive Order and the agency has prevented more than 50 shortages so far in 2012 due to early notification from manufacturers, which is voluntary.
 
FDA also pointed to a report from the U.S. Government Accountability Office, which states that “the drug shortages we reviewed in detail were generally caused by manufacturing problems and exacerbated by multiple difficulties” and that “FDA is constrained in its ability to protect public health from drug shortages.  Specifically, FDA is constrained by its lack of authority to require manufacturers to provide the agency and the public with information about shortages, or require that manufacturers take certain actions to prevent, alleviate, or resolve shortages.” 

Cost Pressures Also Lead to Drug Shortages 

The Forbes article also explained how drug shortages are caused by brand name drugs becoming generics.  As drugs go off patent, “the price of a typical generic drug goes down dramatically: around 90 percent after one year.  In many cases, it literally becomes cheaper to pay for cancer chemotherapy than to buy a bottle of Coke.”  Injectable drugs, however, require special manufacturing costs.  “Injectable drugs often need to be lyophilized,” or freeze-dried, “which is extraordinarily expensive—the machine costs around $100 million.”  “It’s a big capital expenditure.”  On top of that, companies had to deal with the blizzard of new FDA enforcement actions.  As a result, drugs become so cheap that companies cannot make a profit on them and therefore, stop making them, which leads to a drug shortage.  

One company told Issa’s committee that of the two dozen or so cancer drugs they make, approximately three quarters are sold at a loss. “The Medicare Modernization Act (MMA) and other government pricing policies have had unintended consequences affecting our ability to make a reasonable profit margin, not only for our oncology products but also for certain other products.”  Because cancer disproportionately affects old people, it’s cancer drugs where the MMA effect is most pronounced. 

Solutions 

Although President Obama issued an executive order aimed at “reducing prescription drug shortages” last October, the emphasis was only on early warning of shortages.  Similarly, the recently passed Prescription Drug User Fee Act “legislation contains some language regarding drug shortages, but again the emphasis is on early warning of shortages, and speeding up FDA reviews, rather than on the real problems: excessive regulatory interference, and Medicare’s price controls.” 

As a result, the report recommends that Congress be given new oversight when FDA issues a warning letter, “especially when that warning letter would impact the supply of generic injectable drugs.”