2023 USP Report highlights economic factors driving drug shortages

Executive Summary 

Drug shortages remain a persistent issue in the US, significantly affecting patient care. The USP has worked to mitigate these shortages, ensuring patient access to essential medicines. The report emphasizes the role of economic factors in the increasing number and duration of drug shortages.  

The executive summary states, "This report analyzes the economic fa f ctors of drug shortages in the United States to equip policymakers and industry leaders with data-driven insights to shape policies and investments to prevent and mitigate future drug shortages." 

Key Insights from the USP Medicine Supply Map 

The insights in this report are derived from the USP's Medicine Supply Map, which employs artificial intelligence and predictive analytics to identify, characterize, and predict risks within the complex supply chain for drug products and their ingredients. This predictive tool helps policymakers and industry stakeholders anticipate potential shortages and implement timely interventions, addressing vulnerabilities in the drug supply chain. 

According to the report, the Medicine Supply Map identified a "severe risk of shortage" for 91% of generic sterile injectable shortages in 2023. Notably, 58% of injectable drugs that newly went into shortage in 2023 were included in this severe risk category. 

Increasing Number of Drug Shortages 

The number of year-end drug shortages has increased over the past decade, with 125 reported in 2023. The report highlights that "the average drug shortage duration is over three years compared to about two years in 2020," indicating a troubling trend of longer-lasting shortages.  

Additionally, a wide range of therapeutic classes has been impacted, with more than half (53%) of new drug shortages in 2023 being for generic sterile injectable medicines. 

Economic Forces Driving Shortages 

The report identifies several economic forces contributing to drug shortages, including low prices, geographic concentration, manufacturing complexity, and quality concerns. These factors are interrelated and exacerbate the issue.  

For example, the report notes, "Most medicines in shortage cost less than $5; 66% of solid oral medicines in shortage cost less than $3 while over half of sterile injectables in shortage were under $5." 

In 2023, the average price of sterile injectable medicines in shortage was nearly 8.5 times less than the price of injectables not in shortage. This significant price disparity highlights the economic pressures that can lead to product discontinuation.  

"Product discontinuation increased by 40% in one year, from 100 drug products in 2022 to 140 in 2023," according to the report. 

Geographic Concentration and Market Vulnerability 

The geographic concentration of production also increases the vulnerability of the drug supply chain. The US is the largest producer of sterile injectable medicines, with nearly half (44%) of the total volume, while India is the largest producer of solid oral medicines at 56%. For drug products newly in shortage, the US has roughly half the total volume production for solid orals (43%) and sterile injectables (49%). 

The report warns, "Without significant market and policy interventions, current drug shortage trends will likely continue or worsen,” underscoring the urgency of addressing the multifaceted challenges contributing to drug shortages. 

Long Duration of Drug Shortages 

The average duration of drug shortages has been increasing year over year. As of December 2023, drugs on the FDA's shortage list experienced an average shortage duration of 1,202 days, nearly one full year longer than in 2020.  

The report indicates, "Almost one-quarter (27 products) of the 125 drugs in shortage have been in shortage for more than five years." 

Therapeutic Classes Affected 

Drug shortages in 2023 affected a wide range of therapeutic classes. The report provides a detailed breakdown of these classes, with oncology, psychiatry, and gastroenterology among the most impacted. More than half (53%) of the drugs newly in shortage were generic sterile injectables, highlighting their vulnerability within the pharmaceutical supply chain. 

Product Discontinuation 

Product discontinuation represents a significant challenge in the context of drug shortages. The report highlights a substantial increase in discontinuations, with a 40% rise in just one year — from 100 drug products in 2022 to 140 in 2023. This trend underscores the drug supply chain's precarious nature and the pressures manufacturers face, especially for low-cost medicines. 

The economic pressures leading to discontinuation are particularly severe for low-cost medicines.  

The report states, "Over half (57%) of the discontinued solid oral medicines were priced less than $4." This statistic indicates that low pricing, while beneficial for patients and payers in the short term, can lead to unsustainable production conditions for manufacturers, ultimately resulting in product discontinuations and shortages. 

Geographic Concentration and Supply Chain Vulnerability 

The geographic concentration of drug production further exacerbates the risk of shortages. The report points out that the US and India dominate the production of critical drug forms. Specifically, nearly half of the world's sterile injectable medicines are produced in the US, while India produces 56% of the world's solid oral medicines. This concentration creates vulnerabilities; disruptions in these regions can have global repercussions. 

For instance, the report notes that for drug products newly in shortage, the US accounts for roughly half the total volume production for solid orals (43%) and sterile injectables (49%). This heavy reliance on a few geographic areas makes the supply chain susceptible to regional disruptions due to natural disasters, regulatory changes, or political instability. 

Multifaceted Solutions Needed 

Addressing the complex issue of drug shortages requires multifaceted solutions. The USP report advocates for significant market and policy interventions to bolster supply chain resilience. It suggests that policy reforms are essential to promote the sustainability of the generic medicines industry, which is particularly vulnerable to economic pressures. 

The report emphasizes, "These collective challenges require multifaceted solutions that can address the dynamics behind persistent and new drug shortages shown in this report." It calls for comprehensive strategies encompassing market-driven and policy-driven approaches to mitigate the risks of shortages. 

Recommendations for Policy and Industry Action 

The report outlines several recommendations for policymakers and industry leaders to address the root causes of drug shortages effectively:  

• Pricing reforms 
• Supply chain diversification 
• Manufacturing investment 
• Regulatory alignment 
• Early warning systems 

Pricing Reforms 

Adjusting pricing mechanisms is crucial to ensure that essential generic medicines remain economically viable for manufacturers. Low prices, while beneficial in the short term, can lead to unsustainable production conditions, resulting in product discontinuations and shortages. To address this, policy measures could include minimum pricing thresholds for essential medicines, ensuring fair compensation for producers. Additionally, value-based pricing models, where prices are linked to therapeutic value and clinical outcomes, can provide a more sustainable approach. 

Reimbursement policies also need adjustment. Aligning reimbursement rates with production costs and incentivizing the manufacturing of essential generics can help stabilize the market. Financial incentives such as tax credits, grants, or subsidies can further support the production of critical medicines, addressing economic pressures that drive manufacturers away from low-margin drugs. 

Diversification of Supply Chains 

Encouraging the diversification of production locations is essential to reducing geographic concentration and increasing supply chain resilience. Reliance on a few regions for drug production creates vulnerabilities. To mitigate these risks, incentives for manufacturing in multiple regions or countries, such as tax breaks and subsidies, can be implemented. This approach distributes production, minimizing the impact of localized disruptions. 

Fostering partnerships and collaborations between countries can enhance resilience. Bilateral and multilateral agreements can facilitate shared manufacturing capabilities, creating a more robust production network. Supporting local manufacturing capacities in emerging markets through technology transfer and infrastructure development can reduce import dependency and enhance self-sufficiency in essential medicines. 

Investment in Manufacturing Infrastructure 

Investing in advanced manufacturing technologies and infrastructure is crucial to enhance the capacity and reliability of drug production, especially for complex forms like sterile injectables. Modernizing facilities and adopting cutting-edge technologies, such as continuous manufacturing, can improve efficiency and quality. Continuous manufacturing allows for uninterrupted production, increasing output and enhancing quality control through real-time monitoring. 

Investing in advanced quality control systems is essential. Implementing state-of-the-art analytical technologies can detect issues early, minimizing shortages due to quality concerns. Automation and digitalization further enhance reliability and efficiency. Capacity expansion through new facilities and upgrading existing ones can meet growing demand and reduce shortages. 

Public–private partnerships can drive these investments. Collaborative efforts between governments, industry, and academia can facilitate developing and deploying advanced manufacturing technologies. Funding initiatives and financial support mechanisms can incentivize the modernization of the pharmaceutical manufacturing infrastructure. 

Regulatory Harmonization 

Promoting international regulatory harmonization streamlines approval processes for generic medicines and reduces market entry barriers. Disparate regulatory requirements create challenges for manufacturers, leading to delays and increased costs. Harmonization can be achieved by adopting common standards and guidelines across regulatory jurisdictions, facilitated by collaborative efforts such as those by the International Council for Harmonizsation of Technical Requirements for Pharmaceuticals for Human Use (ICH). 

Mutual recognition agreements (MRAs) between countries also play a significant role. MRAs allow regulatory agencies to recognize and accept each other's inspection and approval processes, reducing duplicate assessments and speeding up approvals. Expanding these agreements can streamline the regulatory landscape for generic medicines. Harmonizing post-approval changes and lifecycle management requirements further enhances efficiency and reduces barriers to market entry. 

Early Warning Systems 

Enhancing predictive analytics and early warning systems is vital to identify potential shortages before they occur, allowing for proactive risk mitigation. Leveraging technologies such as artificial intelligence and big data analytics can provide real-time insights into supply chain vulnerabilities. Early warning systems can monitor key indicators, such as production disruptions, demand spikes, and regulatory changes, enabling timely interventions to prevent shortages. 

Implementing robust data-sharing mechanisms between stakeholders, including manufacturers, regulators, and healthcare providers, can enhance the effectiveness of early warning systems. Collaborative efforts to develop standardized data formats and reporting protocols can facilitate seamless information exchange. By proactively addressing potential risks, early warning systems can be crucial in ensuring a stable and resilient drug supply chain. 

The inaugural USP Annual Drug Shortages Report comprehensively analyzes the economic factors driving drug shortages in 2023. It underscores the complex interplay of low prices, geographic concentration, manufacturing complexity, and quality concerns that contribute to shortages. The report calls for multifaceted solutions, including policy reforms, pricing adjustments, and supply chain diversification, to address these challenges. 

For stakeholders in the pharmaceutical and life sciences sectors, this report offers valuable insights and actionable recommendations to mitigate the risks of drug shortages. As the report concludes, "Without significant market and policy interventions, current drug shortage trends will likely continue or worsen." Therefore, it is imperative for policymakers and industry leaders to collaborate and implement the strategies outlined in this report to ensure a stable and resilient drug supply chain for the future.