Drug Shortages: Causes, FDA Authority, and Policy Options

Drug Shortages: Causes, FDA Authority, and Policy Options

December 27, 2018
Drug Shortages: Causes, FDA Authority, and Policy Options
Drug shortages have remained a serious and persistent
FDA must maintain and make public an up-to-date list of
public health concern, despite the prevention and mitigation
drugs that are in shortage (FFDCA §506E). The list must
efforts of Congress, the Food and Drug Administration
include
(FDA), and health care providers. While the number of new
drug shortages has declined since its peak in 2011, many
 the name of the drug in shortage,
medically necessary products, such as sterile saline solution
and sodium bicarbonate, remain in shortage. According to
 the name of the drug manufacturer,
FDA, some active drug shortages have persisted for more
than eight years.
 the estimated duration of the shortage, as determined by
FDA, and
Figure 1. Number of New Drug Shortages, 2010-2017
 the reason for the shortage, as determined by FDA,
selecting from the following reasons: (1) requirements
related to complying with good manufacturing practices,
(2) regulatory delay, (3) shortage of an active ingredient,
(4) shortage of an inactive ingredient component, (5)
discontinuance of the drug’s manufacture, (6) delay in
drug’s shipping, or (7) demand increase for the drug.
FDA maintains its list in the form of a searchable database
on its website that provides information about current and
resolved drug shortages and discontinuations reported to the
agency. FDA maintains a separate list for biologics that are

in shortage. The agency also is required to submit to
Source: FDA annual reports on drug shortages for calendar years
Congress an annual report on drug shortages, which must
2015, 2016, and 2017. Presentation from November 27, 2018, public
include the number of actual and prevented shortages and
meeting, “Identifying the Root Causes of Drug Shortages and Finding
manufacturer notifications; FDA communication
Enduring Solutions,” https://healthpolicy.duke.edu/sites/default/files/
procedures; and specified details of FDA shortage
atoms/files/duke-fda_drug_shortages_presentation_slides__0.pdf.
prevention and mitigation actions, among other things.

(FFDCA §506C-1).
Causes of drug shortages include manufacturing and quality
issues (e.g., contaminants); lack of transparency (e.g., lack
Like FDA, the American Society of Health-System
of information about drug quality and supply reliability);
Pharmacists (ASHP) also tracks drug shortages, although
and business decisions made by individual firms (e.g., low
there are differences in how the two track and report
profit margins leading to market exit and mergers resulting
information. FDA’s list is generally targeted toward the
in a limited number of manufacturers).
public, while ASHP’s audience is health care providers. In
addition, among other differences, FDA’s list is based on
Current Law Requirements
manufacturer-provided information, while ASHP’s list is
The Federal Food, Drug, and Cosmetic Act (FFDCA) and
based on voluntary reports from health care providers,
corresponding regulations require that drug manufacturers
patients, and others, and is updated more frequently.
submit to FDA certain information pertaining to shortages.
More specifically, FFDCA Section 506C requires that the
Actions to Prevent Drug Shortages
manufacturer of a prescription drug that is life-supporting,
In 2012, Congress passed legislation to address drug
life-sustaining, or intended for use in the prevention or
shortages. Title X of the FDA Safety and Innovation Act
treatment of a debilitating disease or condition, as specified,
(FDASIA, P.L. 112-144) expanded reporting requirements
notify FDA of any permanent discontinuance or
related to drug shortages; explicitly authorized FDA to
interruption in the manufacture of a drug that is likely to
expedite inspections and review of applications to help
disrupt its United States supply. The manufacturer is
mitigate or prevent shortages; required FDA to submit
required to notify FDA at least six months prior to such
annual reports to Congress; required FDA to establish a
interruption, or, if not possible, as soon as practicable,
task force to develop and implement a strategic plan
which FDA regulation specifies to be no later than five
regarding its response to preventing and mitigating
business days after the permanent discontinuance or
shortages; and required GAO to “examine the cause of drug
interruption occurs.
shortages and formulate recommendations on how to
prevent or alleviate such shortages.” In 2016, Section 3016
of the 21st Century Cures Act (P.L. 114-255) authorized
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Drug Shortages: Causes, FDA Authority, and Policy Options
FDA to “award grants to institutions of higher education
manufacturing technologies that could eventually “lower
and nonprofit organizations for the purpose of studying and
costs, limit drug shortages, and reduce supply chain
recommending improvements to the process of continuous
vulnerabilities.” For example, continuous manufacturing
manufacturing of drugs and biological products and similar
has been characterized as safer and more reliable than batch
innovative monitoring and control techniques.”
manufacturing and may enable manufacturers to better
prevent and respond to drug shortage and recall events. In
In the past year, FDA has announced a series of actions
contrast to batch manufacturing, continuous manufacturing
related to drug shortages. On July 12, 2018, FDA
uses an uninterrupted process, decreasing the possibility of
announced the availability of a new Drug Shortages Task
introducing human error during the stops and starts of the
Force, charged with looking for “holistic solutions to
batch process. FDA has awarded grants to several
addressing the underlying causes for these shortages.” On
institutions to study and recommend improvements to
November 9, 2018, FDA announced the availability of a
continuous manufacturing of drugs and biologics, pursuant
new tool—the New Inspection Protocol Project (NIPP)—to
to its authority under Section 3016 of the 21st Century
be applied to the agency’s inspection of facilities that
Cures Act. Congress may consider establishing incentives
manufacture sterile injectable drugs, which have been the
for manufacturers to invest in new technologies and to
subject of sterility problems and shortages in the past. On
develop and maintain high-quality manufacturing practices.
November 27, 2018, FDA held a public meeting with
various stakeholders to identify the root causes of drug
Increasing the Role of 503B Outsourcing Facilities
shortages and recommend solutions.
The term outsourcing facilities applies to entities that
compound drugs in large quantities, such as for use in
Policy Options
hospitals (FFDCA §503B). Compounded drugs are not
Congress, FDA, and health care providers have remained
evaluated for safety and effectiveness by FDA prior to use.
concerned about persistent drug shortages, and may
As such, they are generally considered higher risk than
consider a range of policy options to address those
FDA-approved drugs. An entity that elects to register as an
concerns. This section provides examples of policy options
outsourcing facility is subject to FDA inspection and must
that have been proposed by stakeholders.
notify the agency whether it intends to compound products
on the drug shortage list. In most cases, pharmacy
Penalties for Failure to Report
compounding of a drug that is essentially a copy of one or
Under current law, if a manufacturer fails to report a
more approved drugs is not allowed. However, an
permanent discontinuance in or interruption of the
outsourcing facility may compound a drug that is
manufacture of a drug, FDA issues a letter to which the
essentially a copy of an approved drug if the compounded
manufacturer has 30 days to respond, providing the reason
drug is identical or nearly identical to an approved drug on
for noncompliance and the required information. FDA must
the shortage list. However, few data are available on the
make its letter and the manufacturer’s response public,
quality of 503B-compounded drugs, and health care
unless the manufacturer has a reasonable basis for not
practitioners may be hesitant to rely on them. FDA and
notifying FDA. Congress may consider strengthening
Congress could explore the feasibility of sharing
penalties for failure to report the required information.
information about the quality of drugs produced by
outsourcing facilities with certain health care entities.
Development of Contingency Plans
While manufacturers are required to report to FDA
Incentivizing Manufacture of Drugs in Shortage
discontinuations or interruptions in the production of
FDA cannot require a manufacturer to make a drug or to
certain drugs, they are not required to have contingency
make more of a drug. Congress could, however, authorize
plans in place, and preparing for disruptions caused by
FDA to provide incentives to drug manufacturers and
natural disasters is difficult. Congress may consider
outsourcing facilities to make drugs that are on the shortage
authorizing FDA to require or incentivize companies to
list or at risk of being in shortage. For example, Congress
establish contingency plans, particularly for drugs with a
could allow FDA either to waive generic drug user fees or
limited number of manufacturers or drugs that are
to reimburse fees to a generic manufacturer who submits an
frequently in shortage. Relatedly, Congress also may
application for a drug on the shortage list and subsequently
consider expanding FDA’s authority to require
markets the drug. Other incentive options that have been
manufacturers of certain drugs (e.g., sterile injectable
proposed include tax credits, federal grants, and revised
drugs) to conduct a risk assessment to identify the
reimbursement policies for certain generic drugs. Sterile
vulnerabilities in their drug supply, including vulnerabilities
injectable drugs, in particular, are complex to manufacture
that could cause a shortage, and to establish risk mitigation
and have relatively low profit margins. Commissioner
plans to address those risks.
Gottlieb has announced that FDA will be working with the
Centers for Medicare & Medicaid Services (CMS) and
Supporting Manufacturing Improvements
other payers to evaluate reimbursement policies.
As most shortages are the result of manufacturing and
quality issues, supporting and incentivizing companies to
Agata Dabrowska, Analyst in Health Policy
develop and maintain robust manufacturing processes could
help address drug shortages. In March 2015 congressional
IF11058
testimony, the then FDA Commissioner spoke of new

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Drug Shortages: Causes, FDA Authority, and Policy Options

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