How GPOs prevent and mitigate drug shortages, while providing policy solutions to help combat them.
By Todd Ebert, R.Ph., President and CEO of the Healthcare Supply Chain Association (HSCA)
December 2023- The Journal of Healthcare Contracting
Drug shortages are an ongoing crisis affecting healthcare providers and patients across the country. Hospitals and patients nationwide are dealing with shortages of critical, life-saving medications and some providers and patients are now being forced to ration necessary medication. In 2022, the University of Utah Drug Information Service (UUDIS) identified a total of 160 national drug shortages. This figure is likely an underestimated amount, however, as many shortages go unreported and may occur in smaller geographic areas. A survey of manufacturers by UUDIS provided insight into the causes of drug shortages, and more than half of the survey respondents (56%) either did not know the cause of the shortage or wouldn’t provide this information.
The U.S. Food and Drug Administration (FDA) identifies manufacturing quality control issues as the primary cause of drug shortages, along with production delays, lack of raw materials, and manufacturer business decisions to discontinue products. As the sourcing and contracting partners to most hospitals, long-term care facilities, surgery centers, clinics, and other healthcare providers across the country, traditional healthcare group purchasing organizations (GPOs) play an important role in the healthcare supply chain and are leaders in preventing and mitigating drug shortages.
GPOs utilize several strategies to mitigate and prevent drug shortages
Despite limitations with existing data, GPOs track all available data on shortages and raw materials, including active pharmaceutical ingredients (API). GPOs track this data on a global scale to anticipate any potential supply disruptions and provide suppliers with notice to plan for production capability. GPOs identify and help bring to market additional manufacturers of critical medications and ensure that there are auxiliary suppliers of essential medications and products.
GPOs identify and source high-quality products at the best value, providing stability and savings across the industry, and work diligently to ensure a robust, competitive, market for healthcare products by expanding the number of suppliers of essential products and life-saving medications.
GPOs help create a fair, open, and competitive marketplace and compete for business based on a variety of factors including, but not limited to, supplier product pricing, strength of GPO supplier contract terms, breadth of contract portfolio, supply chain and clinical analytical assistance, and customer service. GPOs encourage competition among suppliers, work to expand the number of suppliers in the market and incentivize them to continue producing essential products and life-saving medications. Competition among GPOs is essential to preventing drug shortages.
As part of its advocacy approach, the Healthcare Supply Chain Association (HSCA) and its member GPOs provided a series of recommendations to Congress to further mitigate and prevent drug shortages affecting the healthcare industry. The recommendations included:
- Investing in quality and building secondary supply lines.HSCA and its member GPOs recommended that Congress should not only incentivize production, but also investment in quality and capacity, including the addition of secondary supply lines and having alternate or backup sources of API to support long-term access to generic medications.
- Maintain and/or require buffer inventory. HSCA and its member GPOs recommend that the federal government, through the Administration for Strategic Preparedness and Response (ASPR) and the Strategic National Stockpile (SNS), create, maintain, and/or require buffer inventory for critical medications and devices so there is always an auxiliary supply available.
- Create incentives to increase domestic manufacturing. HSCA recommended that if Congress elects to create incentives related to domestic manufacturing, that the incentives be tied to quality and the amount of product sold in the U.S. For incentives to tangibly impact pricing dynamics, they must align with quality products being made and sold in the U.S.
- Increasing transparency. Healthcare GPOs are leaders in transparency. HSCA recommended transparency regarding buffer inventories and that input from GPOs and other private industry stakeholders be used to determine which drugs, and if possible, which products, should be considered for buffer inventory.
- Mitigating product delays. HSCA recommended that Congress encourage FDA to provide 503B compounding facilities with more flexibility to meet provider demand and loosen restrictions to allow 503B compounders to make certain high-risk products in anticipation of a potential shortage, rather than only in response to an existing shortage.
- Increasing facility inspections. HSCA recommended that Congress increase funding for and encourage the FDA to increase the number of inspections. HSCA further recommended that Congress encourage FDA to begin unannounced foreign inspections for API suppliers and drug product manufacturers.
HSCA and its member GPOs are committed to mitigating and preventing drug shortages and continuously work to determine effective strategies to ensure that healthcare patients and providers can access the medications they need.