Drug shortages reflect “broken market” – FDA

In a statement, the FDA says chronic shortages of certain medicines in the U.S. have not produced the expected responses from drugmakers that traditional economics predict, specifically, increasing prices to reflect a supply/demand imbalance aimed at achieving profitable production to satisfy said demand.

A just-released report from the Drug Shortages Task Force, formed to investigate the root causes of the problem, analyzed 163 drugs that went went into shortage from 2013 – 2017 and compared them to drugs that did not.

Shortage medicines, mostly sterile injectables, were more likely to be relatively low-priced and financially unattractive to produce. Instead of drug manufacturers stepping into the void with more expensive and profitable offerings to fill an acute market need, they have stayed away.

The taskforce cites three reasons: lack of incentives to produce less-profitable drugs, lack of recognition and reward for mature quality management systems and logistical and regulatory headwinds that make it difficult for the market to recover after a disruption.

It emphasizes that there is no single magic bullet to solve drug shortages, but offers recommendations on how to mitigate the problem, including a better understanding of the ramifications of shortages, improved transparency, creating a rating system that incentivizes and rewards the achievement of mature quality management systems (a higher bar than compliance with CGMPs) and contracts that provide manufacturers with sustainable risk-adjusted returns on their investments.

Selected tickers: XLV, BIB, THW, ARKG, BME, GRX, IXJ, BIS, CHNA, GDNA, IDNA, KMED, PJP, IHE, XPH, TEVA, BMY, JNJ, ABBV, BHC, PFE, MRK, PRGO, MYL, LLY, NVS, NVO, OTCQX:RHHBY

https://seekingalpha.com/news/3510787-drug-shortages-reflect-broken-market-fda