AHA Comments before House Committee on Ways and Means on "Examining Chronic Drug Shortages in the United States"

of the 
American Hospital Association 
for the 
Committee on Ways and Means 
of the 
U.S. House of Representatives 
“Examining Chronic Drug Shortages in the United States” 
February 6, 2024

On behalf of our nearly 5,000 member hospitals, health systems and other health care organizations, and our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the American Hospital Association (AHA) thanks you for the opportunity to submit comments to the House Committee on Ways and Means regarding the important topic of drug shortages in the United States.

America’s hospitals and health systems have long been concerned about shortages of a wide range of drugs used to treat patients. Of particular concern to hospitals are the cascading impact of drug shortages on patients and the heightened stress on scarce hospital resources. Shortages can adversely affect patient care by causing delays in treatment, increasing the risk of medication errors and requiring the use of less effective alternative treatments. As a result, diseases that are curable or manageable for most patients, such as childhood leukemia, may not be able to be treated effectively.

When a drug is in shortage, hospitals must find an alternative drug to provide their patients. This process of finding and procuring an alternative drug can result in significant costs to the hospital. An analysis published in 2019 estimated that drug shortages result in at least $359 million annually in additional labor costs to hospitals.1 This comes on top of the estimated $200 million annually that hospitals and health systems spend paying higher prices to acquire alternative therapies.2 Due to the increased cost and necessity of treating patients in a timely manner, especially in cases of cancer and other serious illness, it is important to ensure the pharmaceutical supply chain is protected and priority drugs are identified and given special attention so that continual access is ensured for patients.

However, it has become increasingly clear that our national pharmaceutical supply chain is fragile; this fragility poses significant risk to the patients and communities served by America’s hospitals and health systems. Various businesses make up the pharmaceutical supply chain, including suppliers, manufacturers, distributors and group purchasing organizations. A disruption anywhere in the chain can create prolonged difficulties in pharmaceutical supply acquisition for providers, which can directly affect their ability to treat patients.

Exacerbating these difficulties is the “lean” or “just-in-time” framework of supply chain operations. There is effectively little buffer when disruptions occur. Distributors, manufacturers and health care providers have pursued this just-in-time supply chain approach with the goal of more affordable health care by lowering costs; however, during large scale emergencies and other disruptions in supply, the risks and added costs of such a strategy is clear — when those disruptions occur, providers often have little or no notice and can be left scrambling to acquire products necessary to care for the sick and injured.

A 2019 report from the Food and Drug Administration’s (FDA) Drug Shortages Task Force found there are three major root causes for drug shortages.3

  1. Lack of incentives to produce low margin drugs. Manufacturers of older generic drugs, in particular, face intense price competition, uncertain revenue streams and high investment requirements, all of which limit their ability to invest in resilience.
  2. The market cannot identify and preferentially buy from those with better quality management practices. All manufacturers must meet regulatory requirements for adherence to the FDA’s Current Good Manufacturing Practices (CGMP), which set expectations for company processes to be allowed to do business in the U.S. marketplace. Some companies do more than simply conform to these requirements. They take additional steps intended to ensure a reliable supply of the drugs manufactured at their facilities. Currently, purchasers, including hospitals and health systems, have only limited information to assess the state of quality management of any specific drug manufacturing facility and have little information linking the drug products they buy with the facilities where they were manufactured. The lack of information does not enable the market to reward drug manufacturers for mature quality management, back-up manufacturing capabilities or risk management plans, nor does it penalize manufacturers that fail to invest in modernization of their equipment and facilities to ensure a reliable supply.
  3. Logistical and regulatory challenges make it difficult for the market to recover after a disruption. Over the past two decades, the drug supply chain has become longer, more complex and more fragmented as companies have located more production overseas and increased the use of contract manufacturers. Although typical markets would respond to a shortage by increasing production, the complexity of the supply chain, and logistical and regulatory challenges, can limit the ability of drug manufacturers to do so. When companies wish to increase production, they may have to obtain approvals from multiple different national regulatory bodies and/or find a new source of active pharmaceutical ingredients (APIs). If a new manufacturer wants to enter the U.S. market and start selling a drug in shortage, the manufacturer must first develop and file an application with the FDA and await its approval.

To mitigate these challenges, strengthening the supply chain is crucial. A focus on increasing manufacturing redundancy, diversifying where raw materials are sourced and where products are manufactured, and “fattening” the overall supply chain will provide significant improvements. It will allow the supply chain to withstand expected and unexpected fluctuations in the supply of, and demand for, pharmaceutical products and protect it against future public health emergencies and natural disasters.

Supply chain issues can adversely impact patient care by delaying treatment, worsening patients’ health outcomes or requiring patients to switch to non-optimal treatment regimens. Congress should act to strengthen the ability of the pharmaceutical supply chain to respond when there is an emergency that creates a sudden rise in demand for medications or a significant disturbance in the supply chain that threatens the availability of critical medications. We recommend that Congress consider providing additional authorities to the FDA to mitigate and prevent drug shortages, such as by developing and disseminating manufacturing quality ratings that could enable hospitals and Group Purchasing Organizations (GPOs) to choose to do business with more reliable manufacturers, sending a market-based signal to support a reliable supply chain, and expanding the agency’s authority to require manufacturers to notify the agency about unusual spikes in demand of essential medications. Congress could also consider expanding the authority of the FDA to require manufacturers doing business in the U.S. to have an emergency response plan that anticipates likely disruptions in the manufacture of critical drugs, describes what steps would be taken to rapidly restore production and to run drills practicing putting those steps in place. These could be embedded in the CGMP requirements.

Specifically, the AHA recommends that Congress enact legislation including:

  1. Diversifying manufacturing sites as well as sources of critical raw materials to ensure supply chain sustainability. Currently, the U.S. relies heavily on both China and India for the API and key starting materials (KSMs) necessary to manufacture pharmaceutical products. Further, many manufacturers of these products utilize manufacturing facilities located in both China and India. The overwhelming reliance on a limited number of countries for these pharmaceutical products necessary to care for patients in the U.S. raises serious concerns and poses significant risks to patients and burden on health care workers should a disruption occur. Congress should encourage redundancy in the supply chain through policy initiatives focused on spurring diverse sites of production, including where possible, onshore or near shore manufacturing of critical API and KSMs.
  2. Increasing end-user inventories and incentivizing additional cushion. The current just-in-time approach to supply chain logistics functions creates a hazard that becomes a reality during a significant supply chain disruption or emergent need to surge care delivery. Steps need to be taken to “feed” the supply chain with the goal of ensuring enough product is available, or capable of being made available, when demand increases. For example, supporting an increase in end-user inventory of critical medications as well as supplies held across the existing manufacturing and distribution infrastructure in the U.S. will help add necessary capacity to deal with interruptions in the availability of a critical drug. These actions may decrease the need for large national and state stockpiles, which can be difficult to manage and maintain, and present significant operating costs, product expiration and waste issues.
  3. Requiring the FDA to develop ratings of the quality management processes of drug manufacturers which are predictive of supply chain and manufacturing vulnerabilities and make these quality ratings publicly available.
  4. Requiring drug manufacturers to disclose to the FDA the locations where their products are manufactured, including contract manufacturer locations, as well as the locations from which they source KSMs, API and excipients used in their finished products, in order illuminate the extent of vulnerability for a product and to allow the development of targeted supply strengthening measures.
  5. Requiring drug manufacturers to notify the FDA of unusual spikes in demand of essential drugs to allow the agency to take steps to mitigate or prevent any impacts on availability and prevent potential shortages.
  6. Requiring the FDA to identify those essential drugs, including their KSM, API and excipients and component parts, that should have increased domestic manufacturing capacity to improve the resilience of the U.S. drug and device supply chain and make recommendations to incentivize their production.

The AHA has been supportive of several bills that have sought to address supply chain issues which we believe will help address the issue of drug shortages. For example, this year, the AHA supported the Mapping America’s Pharmaceutical Supply (MAPS) Act (H.R. 6992) in the House, which would require the Department of Health and Human Services to update its essential medicines list and create a database to help predict vulnerabilities in the U.S. pharmaceutical supply chain.4

We thank you for the opportunity to submit comments the House Committee on Ways and Means regarding drug shortages and look forward to continuing to work with you on this important issue.


1  https://wieck-vizient-production.s3.us-west-1.amazonaws.com/page-Brum/attachment/c9dba646f40b9b5def8032480ea51e1e85194129
2 https://www.fiercepharma.com/pharma/drug-shortages-cost-u-s-care-providers-at-least-200-million-annually-pose-patient-safety
3 https://www.fda.gov/drugs/drug-shortages/report-drug-shortages-root-causes-and-potential-solutions
4 https://matsui.house.gov/sites/evo-subsites/matsui.house.gov/files/evo-media-document/matsui_038_xml_v4.pdf