The shortage of generic injectable drugs in the U.S. has been an ongoing, grave (and sometimes life-threatening) problem. Although there are multiple factors given for these inexcusable shortages, the main reason is rarely mentioned: the Medicare Modernization Act (MMA), which was signed into law in 2003 by President Bush, and took effect a few years later.
While numerous other reasons for the shortages have been given—quality control, hoarding of supplies by grey market suppliers, and a reduction of the number of companies manufacturing these cheap generics – it is clear that price controls are at the root of the issue.
While the MMA added prescription drug coverage to the Medicare program, it also changed the reimbursement rate for injectable drugs and capped the drug’s price Medicare’s reimbursement at 6 percent semi-annually. This is the real reason we are in this mess. The other explanations are of lesser importance and sometimes self-serving. (Read about Kathleen Sebelius, the head of Health and Human Services, bragging about how the FDA prevented 137 shortages last year). As if the problem is on the way to being solved.
Nothing illustrates the effect of price controls on shortages better then the following graph. (Source: NPR). It is no coincidence that the shortages skyrocketed with the beginning of the price controls.
It is difficult to establish whether the problem is improving or not, since this depends on who is counting. Estimates for drug shortages in 2013 range from 54 to 200 to 324, making it impossible to determine whether the situation is merely bad or extraordinarily bad.
But the fact that we are still short on cancer drugs, saline, general anaesthetics and nutrients in no way suggests that this issue is being resolved. In fact, it may be getting worse.
ACSH’s Dr. Josh Bloom’s 2011 editorial in the New York Post documented some of the horror stories that resulted from these shortages. He says, “Although the FDA is making an attempt to try to mitigate this situation, it is a problem that they didn’t start. You can thank Congress for this. At some point our esteemed leaders will learn that price controls never work—except badly. They are as good a way to guarantee a shortage as you’ll ever come up with. This should surprise no one.”
ACSH friend, Dr. David Seres, director of medical nutrition at Columbia University Medical Center has much to say on this subject. He and Dr. Bloom give their perspectives in today’s video.