Economics Behind Cancer Drug Shortages
Having cancer is stressful enough, but what if potentially lifesaving chemotherapy drugs were in short supply and unavailable to you? And how would you feel if these shortages were entirely preventable?
President Obama recently signed an executive order directing the FDA to step up work to reduce drug shortages. Drug companies will be required to let the FDA know of the possibility of drug shortages sooner. The FDA and the Department of Justice will be investigating abuses that would lead to drug shortages, and agencies will be empowered to stop the practice of driving up prices and creating shortages due to the manipulations of companies or distributors.
Why are many cancer drugs in short supply? The New England Journal of Medicine (NEJM) explains:
The main cause of drug shortages is economic. If manufacturers don’t make enough profit, they won’t make generic drugs. There have been some manufacturing problems, but manufacturers are not required to report any reasons or timetable for discontinuing a product. Contamination and shortages of raw materials probably account for less than 10% of the shortages. In addition, if a brand-name drug with a higher profit margin is available, a manufacturer may stop producing its generic.
The second economic cause of shortages is that oncologists have less incentive to administer generics than brand-name drugs. [...] Oncologists buy drugs from wholesalers, mark them up, and sell them to patients (or insurers) in the office. [...] In recent decades, oncology-drug prices have skyrocketed, and today more than half the revenue of an oncology office may come from chemotherapy sales.
Cancer-related health care expenses are exploding. An LA Times article reports that “the time it takes to manage these drug shortages has added $216 million to the nationís healthcare labor costs.”
Mandy L. Gatesman, Pharm.D., and Thomas J. Smith, M.D., authors of the NEJM article, offer some solutions:
- Regulate cancer drug prices, setting generic prices higher to give companies incentive to keep making them, similar to what is done in Europe, where there are fewer shortages.
- Pay oncologists more for talking with cancer patients about their treatment rather than incentivizing expensive procedures.
The NEJM reports concludes, “The current system not only is unsustainable but also puts oncologists in potential ethical conflict with patients, since it hides revenue information that might influence drug choices and thus affects costs and patients’ copayments. The only good news is that the drug shortages may catalyze a shift from a mostly market-based system to one that rewards the provision of high-quality cancer care at an affordable cost.”
Obviously, putting oncologists in conflict with the best interests of their patients is a bad thing. For many people with cancer, we’re talking about life and death decisions.
Jay Cuetara, a cancer patient and advocate has a few words to say on the subject:
Bonnie Frawley, Pharmacy Manager at Brigham & Women’s Hospital talks about the prescription drug shortage.
Image credit: U.S. National Institutes of Health