Senate Finance Committee introduces legislation aimed at fixing drug shortages

The Senate Finance Committee introduced bipartisan legislation Friday aimed at preventing and reducing generic drug shortages by leveraging Medicare and Medicaid programs.

The draft legislation proposes the creation of a “Medicare Drug Shortage Prevention and Mitigation Program” that would encourage improved contracting and purchasing practices in the drug supply chain. The program would begin in 2027, according to the committee.

The provisions would include requiring Medicare participants to adopt “new standards for supply chain resiliency, reliability, and transparency” for generic drug purchasing in order to receive Medicare payment incentives.

Among these standards would be minimum three-year contracts with manufacturers, purchase volume commitments, requirements for contingency contracts with alternate manufacturers and transparency around manufacturer quality control issues.

Providers who meet core standards would be eligible for “quarterly, lump-sum incentive payments.”

Last month, the American Society of Health-System Pharmacists recorded the highest number of domestic drug shortages since it began tracking this metric in 2001, with 323 active shortages. Commonly prescribed drugs Adderall and Albuterol have been in shortage since 2022.

Generic drug manufacturers work with extremely thin margins, putting pressure on them to oftentimes operate at capacity. This practice, however, leaves generic drugs particularly vulnerable to shortages when disruptions occur.

Committee Chair Ron Wyden (D-Ore.) blamed “monopolistic middlemen” for putting “market power and profit over families’ health care.”

“Our bipartisan proposal uses the power of Medicare and Medicaid to ensure the entire American health care system has adequate supply for key medicines across the country,” Wyden said. “Middlemen like GPOs should not be able to do business with Medicare if their contracting practices are actively worsening the drug shortage challenge in America.”

“Prescription drug shortages are fueling high prices and limiting access to life-saving treatments and cures,” ranking member Sen. Mike Crapo (R-Idaho) said. “We look forward to working with other members, experts and stakeholders on addressing these life-threatening challenges and promoting consistent, cost-effective health care for Americans nationwide.”