by The Federal Trade Commission and the Department of Health and Human Services said Wednesday they would examine the causes of generic drug shortages and the practices of “powerful middlemen” involved in the supply chain.
The federal agencies’ investigation targets group purchasing organizations and drug distributors that have been in the spotlight in recent months as drug shortages hit a 10-year high. The agencies want to examine the companies’ influence on how drugs are sold to hospitals and other health facilities, assessing whether middlemen put pricing and manufacturing pressures that led to breakdowns.
During congressional hearings last year, oncology experts testified about the effects of the shortages and described difficult decisions that forced them to ration key chemotherapy drugs. They detailed gaps in supplies from month to month, sometimes week to week, that posed deadly risks for some patients.
“For years, Americans have faced severe shortages of critical medications, from chemotherapy to antibiotics, putting patients at risk,” FTC Chairwoman Lina Khan said in a statement. “Our investigation seeks information on the factors driving these shortages and examines the practices of opaque drug intermediaries.”
In previous interviews with The Times, generic drug industry executives had expressed deepening concerns about their reliance on three large group purchasing organizations for contracts to sell drugs to hospitals and health care customers. Generic executives complained that their companies sometimes offered below-market prices to win big contracts, a strategy that had eroded stability in the industry, especially among makers of sterile injectable products often used in surgical care and of cancer.
Lawmakers have echoed the concerns. Late last year, Sen. Ron Wyden, an Oregon Democrat and chairman of the Senate Finance Committee, criticized “very powerful health care middlemen” in the generic drug industry. Last month, he and Sen. Mike Crapo, R-Idaho, border ways to limit drug shortages, focusing in part on proposed changes to Medicare payments for sterile injectable drugs.
Dr. Robert Califf, commissioner of the Food and Drug Administration, testified in Congress last year about the limits of the agency’s ability to manage drug shortages, pointing to market dynamics (such as low prices and decline) in the generic drug industry.
The shortage of chemotherapy drugs has become news for lawmakers and the pharmaceutical industry. Cancer specialists have been forced to write treatment guidelines that recommended giving low doses to those patients who had a chance of being cured and denying them to patients with metastatic disease who wanted to live longer.
The main chemotherapy drugs that have been in short supply, cisplatin and carboplatin, are crucial for treating lung, breast, testicular, ovarian, and head and neck cancers. In recent years, prices for both drugs have fallen to around $15 to $20 per dose, even as Intas Pharmaceuticals, an India-based drugmaker, gained market share.
Intas halted manufacturing of the drugs amid quality concerns raised by a surprise FDA inspection in late 2022. That resulted in a broader shortage, which generic drug industry executives pointed to as an example of how the Falling prices and winner-take-all contracts increased reliance on fewer drug makers.
The FTC investigation announced Wednesday focuses on whether concentration among drug industry middlemen “has discouraged suppliers from competing in generic drug markets.” The agency accepts public comments as part of his research on scarcity.
The Affordable Medicines Association, a generic drug industry trade group, praised the FTC for trying to address the problem. David Gaugh, the group’s acting president, said in a statement that it was important for the agency to consider lower generic drug prices, concentration among intermediary companies and shrinking manufacturing sites.
“As a result of all of this, the risk of drug shortages will only increase if steps are not taken to strengthen the long-term sustainability of generic manufacturing,” Gaugh said in a statement.
The federal investigation is expected to investigate the three major group purchasing organizations that contract with generic drug makers to supply drugs to hundreds of customers. Todd Ebert, president of the Healthcare Supply Chain Association, which represents the group’s buyers, said the companies offer hospitals and other health care providers competitive prices as well as a reliable supply of drugs.
“GPOs help stabilize the generic drug market by working with manufacturers on contracts that provide the certainty and predictable demand they need to remain in the market,” Ebert said in a statement. He added that the organization looks forward to “sharing more with the FTC about the critical role of GPOs in addressing the current drug shortage crisis.”
The Healthcare Distributors Alliance, which represents major companies such as McKesson, Cardinal Health and AmerisourceBergen that charge fees to generic drug makers for transporting their drugs, also did not respond to requests for comment.
