Today, the U.S. Department of Health and Human Services (HHS) released a white paper highlighting steps HHS has taken to prevent and mitigate drug shortages and proposing additional solutions for policymakers to consider. Drug shortages have occurred in the nation’s health care system for several decades, largely due to market failures and misaligned incentives. With today’s white paper, HHS offers solutions and stands ready to work with Congress to ensure no patient faces the devastating consequences of drug shortages or goes without needed medicines.

“All across our Department, we are working to ensure that millions of Americans will have access to medication, treatment, and services that save lives and improve health outcomes. That’s why advancing and implementing solutions to the nation’s drug shortages are so important, and why we want members of Congress and all actors in the supply chain to consider and act on the policy options presented in today’s white paper,” said HHS Secretary Xavier Becerra.

Through the Assistant Secretary for Planning and Evaluation (ASPE), Administration for Strategic Preparedness and Response (ASPR), the Food and Drug Administration (FDA), the Centers for Medicare & Medicaid Services (CMS), and others, HHS has been working to improve how the department monitors the pharmaceutical supply chain and responds to disruptions. HHS has established a new Supply Chain Resilience and Shortage Coordinator role to strengthen implementation of strategies to enhance supply chain resilience for pharmaceuticals and other medical products, and has issued guidance to increase supply chain transparency, while continuing to consider additional long and short-term solutions. FDA discloses certain inspection information to provide the public with an understanding of actions the Agency takes to protect public health and is also developing a quality management maturity framework that may support adoption of manufacturing practices that are more resilient. HHS has also collaborated with other government agencies on this critical issue. For example, last month HHS and the Federal Trade Commission jointly issued a Request for Information to better understand the causes – and potential solutions – of generic drug shortages.

HHS has also taken steps to increase resilience and redundancy within the market. This work includes supporting domestic manufacturing of key ingredients and drugs to address various vulnerabilities. ASPR has invested $500 million to date to support active pharmaceutical ingredient (API) manufacturing, and is exploring how it can utilize new authorities authorized by the President last year to promote the onshoring of essential medicines, medical countermeasures, and their critical ingredients. Moreover, HHS is developing policies to foster resiliency by considering Medicare payments, and additional requirements, to support a more diverse supply chain.

While the above progress is important, HHS concludes that effective longer-term solutions may require additional authorities and resources to align market incentives in order to reward investment in supply chain resilience. Developing and implementing a Manufacturer Resiliency Assessment Program and a Hospital Resilient Supply Program will advance us toward these goals.

Today’s white paper outlines how these programs could operate and help address the broader market issues that lead to drug shortages. The white paper focuses on the generic sterile injectable (GSI) drugs that form the basic layer of hospital care and make up the majority of shortages – which occur across therapeutic areas. However, HHS recognizes that these challenges affect other medical products, and expects the concepts and solutions that this white paper discusses may be relevant for other markets as well.

Key highlights of the white paper include:

• Drug shortages impact patients, families, caregivers, pharmacists, hospitals, nursing homes, hospices, and other individuals and entities across the health care system.
• Drug shortages are a decades-old problem arising, in part, from market forces that touch stakeholders across the drug supply chain—providers and pharmacies, manufacturers, and the middlemen in the system. Key issues include a broad lack of transparency, concentration among middlemen, and prices for generic drugs that are driven to levels so low that they create insufficient incentives for redundancy or resilience-oriented manufacturing, distribution, and purchasing. These market failures lead to pharmaceutical supply chains that are brittle, disruption-prone, and too slow to recover from shortages.
• Supply chain resilience involves fostering processes that are less likely to face disruptions, as well as establishing the ability to withstand and mitigate disruptions so their impact—when they occur—is limited. This resilience also comes from diversification of supply—both in redundancy of manufacturing capacity and a balance of domestic and diversified foreign sourcing—and the presence of reliable, efficient, and sustainable, robust manufacturing practices.
• HHS has made significant strides in shoring up the system’s ability to respond to shortages. Nevertheless, more impactful and enduring solutions require additional statutory authorities and funding to resolve underlying causes of shortages. All supply chain participants play a part in these solutions.
• This paper describes policy concepts for consideration, including collaboration with the private sector to develop and implement a Manufacturer Resiliency Assessment Program (MRAP) and a Hospital Resilient Supply Program (HRSP). As described, the combination of these programs would bring transparency into the market, link purchasing and payment decisions to supply chain resilience practices, and incentivize investments in supply chain resilience and diversification in the supply chain—including domestic manufacturing—at a scale that would drive impactful change in the market. This paper focuses on generic sterile injectable medicines used in inpatient settings, given their importance to acute inpatient care, and their relative risk of supply disruptions—though HHS recognizes that these challenges affect other products, and therefore, the solutions described here may be applicable in other markets.

The white paper, “Policy Considerations to Prevent Drug Shortages and Mitigate Supply Chain Vulnerabilities in the United States”, is available at https://aspe.hhs.gov/reports/preventing-shortages-supply-chain-vulnerabilities.