OPINION:
The United States is facing an unprecedented drug shortage crisis, with a record 323 active shortages at the start of 2024 — the highest number since 2001.
While the COVID-19 pandemic increased public awareness of drug shortages, they predate the pandemic. Two major factors are now exacerbating them: foreign government subsidies and massive regulatory oversight failures by the Food and Drug Administration.
America has become dangerously reliant on foreign manufacturers — particularly in China and India — for the generic drugs that account for 91% of U.S. prescriptions dispensed. In 2000, China and India accounted for roughly 25% of the global share of active pharmaceutical ingredient filings. By 2021, India alone accounted for 62% of active filings, with China at 23%. Today, these two countries dominate the U.S. market, supplying most generic drugs.
This foreign dependence poses significant risks to national security and public health. The Indian government’s massive system of subsidies for its generic pharmaceutical industry is a major factor. This has given incentive to the offshoring of U.S. drug production, creating a dangerous reliance on Indian manufacturers. Even more concerning, Indian manufacturers frequently violate FDA regulations, resulting in significant safety concerns.
The FDA’s failure to adequately inspect and regulate foreign manufacturing plants has exacerbated the drug shortage crisis. Despite finding numerous violations at foreign facilities, FDA oversight has been inconsistent and insufficient. There is an alarming lack of regulatory oversight in India, which has caused serious complications in patients and even death. Generic cough syrups from India have killed dozens of children, and other drugs have been contaminated or caused blindness. FDA inspection data reveals a steep decline in foreign inspections. In 2019, the FDA inspected 37% of nearly 2,500 overseas manufacturers. By 2022, inspections plummeted to 6% of roughly 2,800 manufacturers — with only 3% of Indian manufacturers being inspected.
The FDA’s inadequate oversight has created a regulatory loophole, allowing foreign manufacturers to produce substandard drugs with minimal consequences. This situation has forced the FDA into impossible choices, such as allowing drug imports from noncompliant foreign manufacturers or risking a complete lack of supply of critical medicines. Last year, due to a national cancer drug shortage, the FDA permitted the Chinese drug manufacturer Qilu Pharmaceutical to ship an unapproved cancer drug to the U.S. It also allowed a banned Indian factory to ship the lung medication Atovaquone to the United States.
There is no silver bullet to solve the drug shortage problem. Instead, a multifaceted approach is necessary. First, there is an urgent need to rebuild domestic production of essential medicines. Senate Majority Leader Charles E. Schumer, New York Democrat, has proposed a four-point plan that includes incentives for domestic manufacturing and improving safety and quality. Helpfully, the PILLS Act introduced by Rep. Claudia Tenney, New York Democrat, does that through production-based tax credits, investment tax credits and domestic content bonuses intended to encourage the reshoring of generic drug production.
But boosting domestic production alone is not enough. Congress must significantly reform the FDA to ensure it can effectively oversee foreign drug manufacturers. This includes increasing the frequency and rigor of inspections and closing regulatory loopholes that allow noncompliant manufacturers to operate with impunity. The FDA must also enhance its ability to obtain accurate pharmaceutical quality information from foreign manufacturers.
Congress must also address the economics of the generic drug industry. Valerie Jensen, associate director for drug shortages at the FDA, has pointed out that foreign manufacturers’ race-to-the-bottom price strategy is driving shortages. Generic sterile injectables — which are crucial in hospitals — have become so cheap that it is no longer profitable for U.S. companies to continue production. FDA Commissioner Robert Califf has also warned about the lack of sufficient reserves of generic drugs in the U.S.
According to the Centers for Medicare & Medicaid Services, over 155 million Americans are enrolled in Medicare, Medicaid and the Children’s Health Insurance Programs. The U.S. government should leverage this massive customer base to support domestic manufacturers. At a minimum, the federal government should give priority to domestic manufacturers when federal agencies are procuring drugs directly.
The Department of Veterans Affairs, the Strategic National Stockpile and the Department of Defense should prioritize signing long-term contracts with domestic manufacturers. CMS should also advance payment policies to support procuring higher-quality essential domestic medical supplies. That would align with President Biden’s executive order, which was intended to create a sustainable public health supply chain.
Addressing the drug crisis requires a comprehensive approach that includes rebuilding domestic production, reforming the FDA, and addressing the economics of the generic drug industry. By taking these steps, the U.S. can secure its drug supply chains and ensure that patients have access to safe, high-quality medications.
• Nick Iacovella is a senior vice president at the Coalition for a Prosperous America. Follow him @nickiacovella.
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