Ignoring a solution to chronic drug shortages
Also, is it fair to compare what it costs private industry to produce a drug on the quick and dirty, as opposed to what it would cost the government to do it right — in other words, to build in excess production capacity so as not to get caught short?
Certainly not, says Morse, the Columbia professor. The proper comparison is what it would cost private enterprise to build and maintain sufficient production capacity versus what it would cost the government to do the same — and there’s no evidence to suggest that companies could do it cheaper than the government, only evidence that the private sector has been unwilling to do it.
Even if it did cost the government more to build a factory that could guarantee supply, “the government doesn’t have to make a profit,” Morse says, so the additional expense can be more easily absorbed. “It’s what allows government to do what no private sector enterprise can survive with, because companies have to make money.”
Despite upsides, still off the radar
Given the chronic problems of the current system, why wouldn’t policy makers at least examine the potential upside of including government production of medications?
In part, says Kesselheim, the Harvard professor, there’s a cultural bias at work. “The U.S. government doesn’t make generic drugs — or historically hasn’t done so,” he told Remapping Debate. “And so people, when they think of solutions, are trying to think of private market solutions because that’s how production and supply of pharmaceutical products has been handled thus far. We just don’t have a template for it.”
Himmelstein, the professor of public health at CUNY, says it’s not seriously considered because “in our current political milieu, the forces of reaction are so strong that it makes it almost hard to imagine that we could make real advances where government would be allowed to do what it almost certainly could do well.”
Tellingly, federal agencies with the competency and experience that could be useful in operating a state-run drug facility — the FDA, NIH, HHS and the Centers for Disease Control — all declined to make officials available for interviews. Even when Remapping Debate asked the FDA in writing why no federal agencies had proposed or even explored a government option for the shortages, the answer from the agency’s Center for Drug Evaluation and Research was terse: “A federal government-run manufacturing facility would require additional legislation.”
If a government-driven solution to the drug shortages is to gain traction, it will almost certainly need the support of caregivers and scholars willing to check old doctrines of free-market efficiencies at the door — people such as Stacey B. Lee, a health law scholar and assistant professor at the Johns Hopkins Carey Business School, who recently completed a journal article, “The Drug Shortage Crisis: What Happens When Generic Manufacturers ‘Just Say No,’” to be published later this year.
Her article concludes: “The solution to ending shortages lies in removing the economic and regulatory obstacles that prevent manufacturers from achieving profit margins sufficient to produce certain needed medicines.” Nowhere, however, does it address a government option.
Before writing the article, did Lee consider a government solution? (No.) Had she considered it prior to writing, would it have impacted her conclusion? (Probably.) Does she think it’s an idea whose time has come?
“Just as a practical matter, I can’t even get my head around this type of an approach,” she says, and pauses. “I mean, this is — holy cow, this is like — I don’t know what it is.” She thinks some more. “Perhaps you could make some headway by making it analogous to Medicare — but even there it’s not as if the government provides the care for seniors in the form of state providers.”
She sighs. “I don’t have a good answer.” But will she consider the idea the next time she delves into the topic? “Yes,” she says, “that I will do.”
Which path is more expensive?
Constructing a state-run pharmaceutical factory would not be cheap. Ken Inchausti, a U.S. spokesman for Novo Nordisk, a Danish pharmaceutical manufacturer that has production facilities in seven countries and offices in 75, says that based on his experience it wouldn’t be outlandish to budget a billion dollars for the construction of a standard drug factory with the capacity to manufacture a wide range of generics.
But the alternative — sticking with the status quo — is likely costing more.
A joint study by the University of Michigan and American Society of Health-System Pharmacists found that drug shortages created $216 million in extra labor costs for hospitals in 2011. (And back then, there were half as many drugs in shortage as there are today.)
Another analysis by Premier, Inc., a hospital group-purchasing organization in Charlotte, N.C., found that hospitals nationwide spent $230 million more on average each year between 2011 and 2013 because they had to pay more for newer, alternative generics when older generics are not produced. Keep in mind that figure is relatively conservative, since it excludes drugs purchased from off-contract distributors, more expensive purchases of therapeutic alternatives and indirect costs such as added labor.
These surveys don’t calculate a slew of other hidden costs: the reduced productivity of workers who spend greater lengths of time than they should away from their jobs because the most effective treatments aren’t available; FDA inspections of overseas pharmaceutical plants when emergency imports become necessary; higher shipping costs incurred to make sure the drugs arrive on time from abroad; the time and money it takes investigating the illicit activities of gray marketeers and unregulated drug manufacturers that attempt to pass themselves off merely as “compounding” pharmacies.
Another cost routinely left unconsidered: Drug shortages also interfere with clinical trials that require older, generic drugs as controls or in combination therapy with experimental agents. The cost of these delays and stoppages has yet to be measured financially, but could “easily” run in the tens, even hundreds of millions of dollars every year, says Erin Fox, the drug expert at the University of Utah.
“The point is there are so many hidden costs that if you could actually account for all of them, and if you could shift those costs into a government-sponsored drug production process, it would not necessarily be a huge incremental expense,” says Richard L. Schilsky, chief medical officer of the American Society of Clinical Oncology. “It would just be money shifted from one ineffective use to a more effective use. That’s a very interesting concept.”