The harsh economic reality of cancer drug shortages

For much of 2023, patients with cancer and their doctors have faced shortages of drugs that are essential to the treatment of some of the most common — and curable — cancers, including ovarian, testicular, bladder, cervical, lung and breast cancers. In July, more than a dozen oncology drugs were being tracked by the Food and Drug Administration. Week after week, oncologists are reporting that these ongoing shortages have delayed and even stopped care, with potentially life-changing results for patients.

While it is convenient to point to the lingering effects of the pandemic, supply chain disruptions, offshore manufacturers, and spiking inflation as the causes of drug shortages, these are just symptoms of a completely broken drug supply market. The harsh reality is that Americans with cancer are now suffering the high cost of very low generic drug prices.

The cancer drugs in short supply today are inexpensive generic sterile injectables. These are not headline-generating brand name treatments with six figure price tags, or simple pills or tablets, but rather very low-cost generic injectable drugs. In fact, the median CMS allowable reimbursement for the most commonly used vials of drugs currently facings shortages is $14.40. A meal at a fast-food restaurant today costs more.

Because these drugs must be made on carefully controlled, sterile manufacturing lines, they are much more difficult and costly to produce. They are also extremely regulated by the Food and Drug Administration (FDA) which can add additional complexity and burden to manufacturers.    

When these drugs are sold into the U.S. health care system, they are subject to mandatory discounts, rebates, and price controls that push the net selling price to generic drug manufactures to break-even or at a loss. You don’t need a Ph.D. in economics to understand what happens next: If the companies we rely on to manufacture these low-cost generic drugs can’t turn even a miniscule profit, they will simply stop producing them.

Currently, the most serious shortages are with the cancer drugs carboplatin and cisplatin, both platinum-based generic and essential drugs. Approximately 10 percent to 20 percent patients treated with chemotherapy receive platinum-based therapies. Over the years, the reimbursement levels of both have dropped by ~95%, while the cost of platinum — a core component of the drugs — has more than tripled.

What’s behind these shortages? Our own government. As the single largest payer for cancer drugs, Medicare and Medicaid have outsized influence in the market for cancer drugs, requiring inflexible pricing schemes, severe discounts from the 340B Drug Pricing Program, and Medicaid inflation caps and now the same for Medicare as part of the Inflation Reduction Act. The end result is that these very inexpensive drugs end up with net sale prices of pennies, in cases.

The harsh reality is that mandatory government discounts and rebates are powerful market disincentives for manufacturers to stay in the business of making generic sterile injectable drugs. And for those that do stay in the business, why would they invest in maintaining or upgrading equipment when prices are pushed to artificially low levels? The result of this broken market dynamic is a vicious cycle where underinvestment in aging generic drug plants leads to failed FDA inspections and shutdowns or equipment breakdowns with little to no redundancy. So, when one manufacturer goes down the system is pushed into chaos. And with offshore manufacturers, we are not only more reliant on other countries like China for these drugs, but second (at best) in line when shortages hit.

The drug shortages we are seeing today are nothing new. Nearly 12 years ago I testified to Congress on, what was then unprecedented, widespread cancer drug shortages. My testimony then centered on how these shortages would continue if Congress did not fix the broken market dynamics the government itself had created. When I testified again last month on the very same issue, I gave much of the same commentary because, unfortunately, nothing has been fixed. In fact, it’s only gotten worse.

The problem has long been that many in Congress are unable or unwilling to address the root financial causes of cancer drug shortages and what must be done to fix them. Fortunately, it seems that after more than a decade of critical drug shortages there might finally be hope. The recent discussion draft from House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.) shows that there is an understanding of the broken market and how to fix it by removing financial disincentives of excess discounts and rebates, as well as strengthening our understanding and awareness of drug supply chains.

Unfortunately, there are several other so-called “fixes” that some in Congress are pushing that will do nothing, and in fact may even worsen the problem. For example, giving the FDA more power to oversee manufacturers won’t do anything to fix shortages when no one is producing the product. And more regulations hoisted on manufacturers endangers pushing what few are left out of the market. Paying hospitals to stockpile drugs not only defies all logic when drugs are in short supply to begin with, but also throws gas on the already burning drug shortages fire.  

It’s an uncomfortable truth, but government policies have caused cancer drug shortages. By treating low-cost sterile injectable generic drugs the same as expensive brand drugs, and forcing rebates, discounts, and price controls upon it, we have effectively broken the market. Now, it is time for Congress to step up and finally address the root economic causes. To Americans depending on these critical drugs to treat and even cure their cancers, it really is a matter of life and death.

Ted Okon is executive director of the Community Oncology Alliance, a national non-profit representing independent community oncology practices and the patients with cancer that they serve. Learn more at www.CommunityOncology.org.