We’re facing a major problem with prescription drugs.
Around the world, there are constantly shortages of one drug or another. The American Society of Health-System Pharmacists (ASHP) lists 157 compounds that are currently facing shortages in the US alone. The list includes everything from antibiotics to vaccines to cancer medications.
And it could be for a counterintuitive reason: Prices are too low for some medications.
How it became a problem
It might seem almost routine that the price of some generic drugs skyrocket, selling overnight for almost 14 times what they cost the day before. But even though this happens — and occasionally draws public attention — the opposite is happening at a far larger scale: Dozens of generic drugs are being discontinued because prices are too low.
This can happen when the makers of a generic version of a branded drug, like the antibiotic clindamycin, decide to come out with their own, far cheaper version of the drug, and one or two other manufacturers hop on the generic bandwagon. Once those companies are producing enough generic drugs to satisfy demand, that price will keep slipping until making the drug is no longer a profitable exercise. At that point, manufacturers start to discontinue production, which leads to shortages if the ones left making the drugs run into any problems.
“Medicines can be too cheap,” Hans Hogerzeil, a professor of global health at Groningen University in the Netherlands and a former director for essential medicines at the WHO told Reuters. “For a viable market model you need at least three and preferably five different manufacturers.”
Having more manufacturers creates a safety net, so if any one of them runs into problems that require them to shut down, another can just amp up production. If prices are too low and manufacturers decide to drop out, then that safety net doesn’t work. But that doesn’t mean that setting a minimum price to keep manufacturers in the game is the right solution to drug shortage problems.
“It’s a ‘three bears’ situation,” Erin Fox, the director of the Drug Information Service at University of Utah Health Care, told Business Insider. Drug prices are too high, drug prices are too low, nothing seems to be “just right.”
Fox said that she expects prices to actually go up on their own as they move toward a situation where there’s more transparency about how the drug is manufactured. Until there’s more transparency around the quality of how the drug’s being processed, she said, “[The higher price is] a bitter pill to swallow.” It’s justifiable to pay for a product when you’re know you’re getting a higher quality in where and how it’s made but, without transparency, there isn’t as much of a case for a sudden rise in price.
Taking on global drug shortages
The World Health Organisation plans to discuss drug shortages — for the first time — at its World Health Assembly in May.
“I hope it will help dispel the myth that drug shortages are only happening in the US,” Fox said.