Why do hospitals keep running out of generic drugs?
26:27 Share

If you enjoy planet money, you should try out N P R plus. With planet money plus, you get sponsoring listening and exclusive bonus episodes from just this show, but you can upgrade to the M P R plus bundle and access perks from over twenty of N P R S most popular podcasts and more. Give a little, get a lot in return.

Visit plus dot N P R dot work. This is planet money from npr. I recently talked to a nurse who has been facing a medical economic mystery. His name is Jerry sivi. He lives in the mountain west.

Had been working in emergency and I C U and flight medicine for about fourteen years now.

What's flight medicine?

Uh, would transport medicine. So some days i'm on a helicopter, some days i'm on a fixing aircraft. It's unpredictable.

I guess, uh, you could get somebody who fell off a Cliff and broke their leg. You could get a bear moling. So that gives .

jerd spoke to us unofficially, ally, as and without clearance from his hierusalem are going to leave the name of his hospital out, but he works with a midsized regional medical center. And gertz problem is medical economic mystery and actually affects nurses all over the country. Drugs that they used to treat patients every single day are sometimes just not available.

This has been a part of health care as long as i've been there. We've had rolling drug shortages of different medications and at different times and for seemingly different reasons.

often this is happening to the cheapest, oldest, most common drugs linstead is routinely using to treat noja or anxiety, or infections or pain. He said. There's a Whiteboard at his work where someone writes down the names of the drugs that have run out. And there is always something on IT. I asked him over the course of his whole career what drugs have .

been on the list on dc.

tron, appan, afon, lazim, c. triaxial. It's already even keep track of a list just because it's it's been so constant newes don't even register unless the shortage last more than a few months because we're so used to having shortages at this point.

When a drug shortage chapps Jordan, his colleagues will figure out a walk around, like sometimes you can get the basic gar water used to help people with lood, but if you don't have iv extras, there is a solid form of sugar that you can score into someone's mouth, jd said. It's basically cake frosting. IT isn't perfect, but IT works.

But sometimes the work round can be really difficult. Like with epiphone used in epipen, but also on a crash card to revive patients in cardiac arrest, you need a specific concentration of epa ephor to do that. And sometimes you can't get IT. So then you try to dilute some other concentration to revive the patient.

We just have the one big bottle and you've got numbers, you know scribble on the side of IT, reminding you had to do the right illusion depending on the size of your patient. And and you're doing a lot of math. Is this one to one thousand? Is this one to ten thousand? And I giving one milligram per kilogram, and I giving point zero one milligrams per filo gram.

trying to do that kind of math while someone is in cardio arrest. IT does not sound like a good situation. And I would say, like to Jerry, this is kind of effective life. But to me, this whole situation sounds truly insane. I did not know that this was going on behind the scenes at hospitals.

Yeah, this is really scary. And for his, Jerry has gotten so fed up with this shortage situation that he wrote us an email here, a planet money, because all of this offends his sense of reason.

This is like weak. One of economics right is this problem is a solve problem in a free market, and simple or the drug is the more upsetting the feeling is shelty water and sugary water, that's like is all this time. So could we please just fix that already?

Yeah, the recipe for salt water is not complicated, right? We needed in these life and death situations IT really feels like somebody should have solved this by now, like what is even happening.

We told Jerry t, we would try to figure that out. Hello, and the planet money.

I'm Sally helm. I'm plexi. It's goi. In a market economy like cars, shortages are a puzzle. Laws of supply and demand should basically solve them, but for some of the cheapest and most common drugs around shortages have become effect of life.

So what is going on here? Why have the basic economic dynamics failed to solve this problem, and what can be done to fix that?

Support for this podcast and the following message come from dignity memorial. When your celebration of life is prepaid today, your family is protected tomorrow, planning ahead is truly one of the best gifts you can give your family. For additional information, visit dignity memorial dot com. As we're all navigating a device of election, no matter what happens, the question remains how the hacks we going to move forward together.

So in this season of the story or podcast from N, P, R stories, from people who made a choice to confront the conflicts in their own lives head on, and in sharing stories from the bravest among us, maybe we can take their lead and find some hope for the rest of us. Get the story core podcast whereever you listen. Want the latest news from the campaign trail and beyond. Well, listen to the npr politics podcast weekly rounded up every friday we tell you what happened and why IT matters. Listen.

and for your politics podcast.

wherever you're listen. All right.

So do we cap? We ve got an email from a planet money listener in nurse who told us that cheap, common drugs at hospitals use every day are constantly running out. And he asked.

why is that finding? The answer to this question took us on a long, convoluted journey. Healthcare, as you may have heard, is complicated.

The economics get kind, strange. Thankfully, early on, I found a very helpful guide. When I first started making calls about drug shortages, one name came up over and over. Marta chans.

yeah. Well, I have been looking at these issues since two thousand and eleven. And at the time I was at the food and drug administration, and so I was pulled into 啊 the drug shortage crisis。

Marta is a health care economist. She's now a senior fellow at the bookings institution, I think tank in twenty eleven when he was at the fda, the drug shortage crisis was really bad. And thirteen years later, it's still is. In some cases, chemotherapy drugs run low that can interrupt treatment. Studies have found that drug shortages hurt patient outcomes that patients can even die.

Marta has been studying all of this for more than a decade, and SHE told us the majority of shortages are happening with one particular kind of drug. They're called generic stereo inject tables, usually administer in hospitals. Almost all the drugs that Jerry t told us about are in this category, like ivy fluid or generic error inject tables. This kind of drug is super common.

I recently did an analysis looking at basically what share of patients that go to a hospital get a generic terror injectable of some sort. And the answer was, in the upper nineties, upper nineties.

almost everyone who ever goes to a hospital that one of these drugs.

that's so we are focusing on those drugs today. And there are three words here, all of them important to understanding the story. Number one, generic.

That means these are older drugs that are not protected by patterns. Anyone can make them. Number two, injectable. These drugs are liquids that are administered red to a surrender or an iv bag, not pills. And that brings us to word number three, because these drugs get injected straight in to our veins, they have to be sterol don't want any bacteria or virus snaking there.

There have been problems where there are medal shavings or glass, but you do not want to have contained in .

these products, right? You absolutely do not. No, we do not want to be injecting medal savings in veins.

So these drugs are made in super sterile factories. It's expensive. There's like brazilians of miles of piping involved. There's really no room for error.

And that brings us to kind of the first explanation for these shortages. A lot of times, the immediate cause is a factory closure or recall or a manufacturing problem because like if you find some bugs in your clean room, you're gotta stop and figure out where they're coming from. And a lot of the violations the fda has found over the years, they are ate a lot worse than that.

I don't even want to tell you what fda inspectors found in some of these facilities because.

oh, I almost I want to ask. But will you tell me one like that .

gives you nightmares a bucket of urine .

in the corner? No, why I they didn't .

want to go to another? I I don't know, don't ask me .

that was that was okay. So a lot of times .

these shortages are coming after the fda dozen inspection and finds a bucket of year and or whatever. And of course, like we could say, the fda won't do inspections. People can just run their factories however they want. That could mean fewer shortages.

right? That is an argument the like. Of course, we can also see the other argument here, like it's good to the fda as inspections. We know the middle pings in our veins. And also, there is still a mystery here because this kind of shortage should be temporary.

When a drug runs low, other manufacturers should see an opportunity to make money, and they should sweep in and start making this drug themselves. And sometimes that does happen. You, there will be a problem of factory.

A couple of drugs start to run low either you will make them, then the factor, mind things get back to Normal. But Martin says that doesn't seem to be the full story. For one thing, some of these shortages are lasting a long time.

And if you look at some of the more recent data on how long shortages last, it's three years. The markets don't adjust very easily.

And also, like we know from Jerry, that these shortages have been happening over and over four years with all different kinds of stereo injectable. Yes, why this this .

keep happening time and time again? Why isn't supply bouncing back as we would hope you would? Aren't manufacturer stepping up making more of these drugs?

One part of the explanation is just IT is hard to build one of these factories. It's also not totally easy to switch from making one drug to making another. But there's a bigger answer here to understand IT.

You've tt a focus on something that so far we haven't talked to battle on and that is the word generic. These drugs that we're talking about are generic stereo injecting ables, meaning they are not underpants ent. Any manufacturer can make them .

if they want to. And yet only for a lot of the drugs that have had ordained, there are not a ton of manufacturer. They're like one or two.

And to understand why I talked to red mccoy these days, he runs on on profit called civic r ex that wants to combat drug shortages. That non profit has actually done this difficult, expensive thing that they have built their own steel factory to make these generic, their injectable drugs. And they told me, look, generaal injecting tables. They are generally not great business.

They tend to be older and tend to be really cheap. And other people have quit making them.

So if i'm the person who wants to make money, do you actually don't recommend this business?

No, I don't recommend IT.

And mad knows what he's talking about here. He hasn't been a non profit dreamer forever before he joined svc. a. He spent more than thirty years at the big drug company, abbot, in the big bad world of capitalism. And he said, look, step back and look at the whole life cycle of a drug. And I think of the world's most famous stereo injectable right now, OEM ic, its proprietary is under pattern, actually multiple patterns. And it's expensive that can sell for like seven or eight hundred dollars a dose.

The market drug, novel ones, all the banks. When the patent expires, several generic companies do the development to do their own ginerous connectable.

At first, they will be able to charge relatively high Prices.

That's when those generic companies make money. They make money as the Prices coming down and the Price will come down as more players come to market.

right? So manufacturers will see that there's money to be made selling generic as epic. So they will get into the generic aseptic game and that will lead to competition. Producers will start under cutting each other on Price to get customers. And so the Price will go down.

And that is kind of the promise of generic drugs. There is a big law in the one thousand nine hundred eighties that helps stimulate this competition by making IT easier to get into the generic game. And that helped bring down Prices. Today, in the united states, the manufacturer Price of generic drugs is actually less on average than IT is. In other similar countries, branded drugs are a very different story, but in general.

generics are cheap OK. So then think about what will happen in this market over time sunday.

when there's ten suppliers, when the Price gets down somewhere between two and four dollars per unit. Some of the U. S.

Players, they say, let's make a ten dollar product. Let's not make the two dollar product anymore because we have a responsibility to our shareholder to max ize profit. They stop making the product .

manufacturer drop out the number of exits A K A drug companies dropping the product. IT is surging between twenty twenty two and twenty twenty three. IT went up by forty percent.

You also might not totally drop out, but you might have an incentive to cut your own costs because you know you're charging a low Price. Cutting costs can increase your margins. Maybe you run your machinery really hard or you don't invest as much to clean your lines. All that makes manufacturing problems more likely.

There's also offering that happens, moving factories to india, for example, where labor cost lower or you might buy your ingredients from companies overseas.

Try to get him for cheap. Now say, for a given drug, you ve gotten down to just one or two. If one of them finds some bacteria in one of the vials and has to shut down or a hurricane, its a factory sudenly you got a shortage.

But that medication may be essential. That medication might be a federal. It's on a crush card. It's been around since ninety thousand five, you know IT maybe essential medication, but the problem is IT sells for two doors and h that's kind of the situation.

That's kind of the situation. We don't have enough manufacturer of these important generic drugs. The view that we do have our incidents fies to keep their cost as low as possible, which can make shortages more likely. But alexy, even still, we have an economic mystery on our hands.

Yes, because we are essentially saying that, weirdly, the Price of these generic stereo inject tables might be too low, too low for manufacturers to stay in the game, too low for them to upgrade their factories and equipment to the point that they wouldn't have all these manufacturing problems.

And if you look to classical economics, you will see an obvious solution here.

Why don't these manufacturer simply raise the Price?

why? Indeed, that is after the break.

With more electoral college votes than any other swing state, pennsylvania is largely seen as the mike or break battle ground.

Get those last couple of yards in the red zone. And pencil va is really, really tough.

The presidential candidates have their eyes on and and so do we all this week on the consider this podcast from N, P, R. Come along. Anxious this october, short wave is helping rangle that fear. And the trick may have to do with horror movies. I feel more alive .

when I am in situations like this.

Learn the surprising science to conquering fear. When you subscribe now to short wave, the science podcast from N P R. Studies have shown that elections can Spike feelings of stress and anxiety.

That's why npr pop culture, happy hours there to help you feel more grounded as we talk about the busiest TV movies and music. Try a show on H. B.

S. Industry, or a round table on ROM, comes to take a step back from the news of the day, at least before you plunge back in tomorrow. New episodes every week on pop culture. Happy hour from N. P. R.

This message comes from the czk y foundation, established one hundred years ago. The crisis y foundation works to expand equity and opportunity in cities across america, a century of impact of future of opportunity, more at risk. E at work.

Okay, let's see. We have been talking about these persistent rolling shortages of generic stereo inject tables, drugs that we are all extremely likely to need should we ever end up in a hospital. And we are beginning to get to the heart of the matter. IT seems like the question we really need to ask is, why is the Price of these drugs so low? Why isn't IT going up?

IT feels like kind of a counter intuitive tive question, like don't we want drug Prices to be low? So IT is worth stepping back for a moment to remind ourselves about the basic laws of supply and demand and how Price fits into that picture.

right? In a free market, over time, supply and demand are supposed to come into this perfect baLance, and that happens through the beautiful and gorgeous mechanism of Price. Thank you. Price is a signal that determines how much of something people are willing to buy and how much producers are willing to make to meet that met.

So when a shortage comes, if all is working as IT, should the Price of these drugs should rise, then more manufacturers will want to make the drug, more supply comes online and the shortage goes away.

And to some extent, during these shortages, that does happen, the Price may go up a little. But as we have discussed, something is still clearly messed up because these shortages are happening over and over. So why doesn't the Price settle at like a sustainable level that prevents them from happening in the first place? The Price mechanism seems to be broken here. So let's take a look at what's going on.

Okay, idea. Number one, health care is not an entirely free market. There are some rules in place that make IT hard for manufacturers to raise is too much.

The reason for that is simple. Politicians want to find ways to keep health care costs down. We asked Martin, machines scope about this.

What are the good reasons to set things up to bring cost down?

What are the good reasons you know we we spend a lot on health care. Um and um I I I I don't even know how to marta struggle to even answer this question .

because like the people want lower health care costs and so the government does have some rules that try to keep drug Prices allow like one that he thinks is important is a rule meant to prevent manufacturer from raising their Prices more than inflation. Martin says. If the government got rid of this kind of rule, IT might help, but that alone would not solve the problem, in part because there is another major factor here that is keeping Prices down. And I have to do the people who are buying these drugs, the hospitals.

Yeah, this is idea at number two about how the Price mechanism is getting messed up here. Hospitals have combined their purchasing power. The vast majority of them have banded together into these things called group purchasing organizations, or gp OS. The top three GPRS in the country represent more than eighty percent of hospital beds.

They negotiate contracts on behalf of hospitals, not just for drugs, but for gloves and beds. And you just anything that a hospital buys.

okay, kind of expense. I mean, hospitals need like a lot of so sheet and like.

that's right. And you just imagine the number of things that they buy, they basically outsourced to group purchasing. Organizations would use the combined buying power to negotiate with vendors, including drug vendors.

By combining their power like this, hospitals can get really good terms with these drug manufacturers.

A lot of these contracts have visions that basically say, if somebody else offers me a Better prize, unless you match IT, basically this contract ends OK. So I can see how in .

that situation, you I mean, you could raise your Price, but you just like lose all your business if .

you this is tough for manufacturers. They don't have long term commitments from hospitals on how much they'll buy.

So hospitals have combined forces who their buying power, and that has been driving Prices down maybe to unsustainable levels. We did reach out to the health care of pie train association, a group that represents GPRS. They said, of course, they don't want shortages and they point in to that Price competition we have talked about among drug manufacturer. They said that's a big part of driving the Price down.

Now of course, hospitals do have a lot of incentives to keep their costs low. And one important factor r here is that once these generics are approved by the fda, the idea is that they all treat disease equally well. In e confirm that makes them basically perfect.

You can use any of them, right? And the payers, medicare medicate, commercial payers are incentivising me to really choose the cheapest.

Yeah, hospitals get paid by insurance. And for these generic stereo injectables in particular, there are a lot ways that insurance is pushing them to choose the cheapest option. For example, sometimes they're reimburse hospitals based on the average Price of that drug across everyone who makes IT. So hospitals don't want to choose one that costs more than average.

So in general, hospitals are trying to get these drugs just as cheaply they can. Meanwhile, manufacturers are slashing costs, nothing right, maybe making their factories worse in the process or maybe there just dropping out of these markets altogether. And all of that makes the entire system more vulnerable to shortage.

which brings us to a third idea about how the Price mechanism might be broken. And this is really not as big theory. IT is all about incentives. There's just not enough incentive for either manufacturer or hospitals to pay to make these drug supply chains more resilient. So basically.

in idio, again, this is a system that tries to drive Prices down. And again, we are doing this for good reasons, but the whole idea of reliability of supply is not at all built into these systems.

Like in a dream world, we would have tons of refinancing in the system. We would have like whole back up factories we could top if we, we would have tons of smart people doing quality control, catching problems before they happen. But all of that is expensive. And IT is somehow not getting baked into the Price of these drugs.

which is a little weird, because you would think that hospitals have an incentive to pay for this. After all, these shortages hurt patients and hospitals are taking care of patients. S, but Martin says, like, of course, hospitals are full of nice people who wants to help. But it's actually not that simple .

when you look at the actual financial implications for and you compare IT to the life and death consequences that you could have for patients, you know, I would argue that there is a gap that hospitals could be doing more, paying attention to IT more.

No shortage is do cost hospitals and money, cold, hard cash, but by some measures not done, shortages hurt patients, but is not the hospital fully stops functioning, in part because nurses like jared ciber are screaming ling for an alternate solution, like using cake frosting instead of I V sugar water or doing that complicated math dilute the big bottle of a penetrant.

And Martin says patients don't really seem to fault hospitals for shortages. Like you can imagine if this was a car company or something and they were constantly running out of some important part, customers would stop buying those cars, the company would get punished. But that doesn't seem to happen here, maybe because these shortages affect basically all hospitals, maybe because patients don't really choose hospitals based on whether they have the right medicine and stock, and maybe because it's really easy for everyone in the situation to just point the finger somewhere else. So what is to be done?

Well, remember, net are non profit dreamer .

on profit net.

His company's solution is basically obviously ditch profit and try to get hospitals to sign onto a new system meant to prevent shortages. They they do things like sign longer contracts where they commit to buying a certain volume of these drugs to try to make all this more sustainable. There's also been some proposed legislation on this, which has some similar solutions.

yeah. And you can imagine that the government could intervene here, help the manufacturer upgrade their facilities, or the government itself could maintain a bigger stockpile of important drugs.

Martin solution has to do with government too, but I would focus on hospitals and changing their incentives because right now, you know, possible do think about shortages to some degree when they're buying these drugs. But meta says the baLance is off.

We need to incentivize hospitals to pay attention to which are reliable and put much more weight on that rather than just Price. You know, they can differentiate themselves on that. Those manufacturers can Carry higher Price point and also the fact that they're going to be getting larger market share. So when one of those less reliable manufacturer has a problem, by that time, they actually have a smaller market here, not the largest one, right? To summarize.

the government would give hospitals some money if they show that they were taking steps to prevent shortages, like by working with a good quality, highly rated manufacturer, then hospitals would have more incentive to buy from those higher quality, so those manufacturers could charge a higher Price.

and maybe the other manufacturers would even anna.

clean up up, cut IT out with the urn back.

In an ideal world, this could lead to like a cade of positive effects, because we have changed hospital incentives.

A key ingredient of this whole plan is good information. Hospitals need to know which manufacturers aren't reliable, and they need to be able to trust .

that another key ingredient is, uh, money. The government would have be willing to spend some money here, and this supply chain resilience could get expensive.

I I guess the way I would put IT is that there is a value to resilience, and I think the value of resilience to patients is much higher than the willingness to pay for resilience by all the other stakeholder that make decisions on behalf of patients.

So that is our long and complicated answer to jared cites question about why these shortages are happening. Somehow, no one seems to be pointing up the money to make this whole drug supply chain Better. It's just hard to get people to prioritize the long term health of the system. And as martis in the people who are really hurt by that are the patients, all of us.

Since my interview with marta, I have been wondering if I were up to us, the patients. Would we actually pay more for the promise of fewer shortages in the future? I'm not totally sure that we would.

yeah. I mean, in general, IT does feel pretty easy to ignore the supply chain behind whatever IT is you're buying totally.

We're all acceptable to that. Just get a trip all you can and hope that you will be there the next time you need IT.

Today's epo de was produced by willa rubin with help from jane sneed and sam yellow horse castle er IT was edited by Martinia castro, fact checking by Donna sulema, engineering by valentino r or giga sanchez planet moneys executive producer is alex school.

Special thanks to the many experts who spoke to me for this story. There was a lot understand here. I also listened to a great recent series on this topic from the health care podcast RAID ops. Check them out. The series is called race to the bottom.

And silly M. S this is M P. R. Thanks for listening.

Wait, we don't tell me fresh air up. First M P R news, now planet money, ted radio hour through line, the M P R politics podcast and bedded books we love wild card are just some of the podcast you can enjoy sponsor free with M P R plus, get all sorts of purse across more than twenty posts with the bundle option, learn more at plus dot N B R that work.

If your black or Brown or personal color, you know that stories about race in the news can sometimes feel like they're made for a different audience at code switch. We're not about that. We're interested in how race lentil shaped your world in real and sometimes funny ways.

Come more. Get out with us together. On the coat switch podcast from N. P. R.

Do you feel like there's more on your to do list than you can accomplish? Or maybe the world's problems feel extra heavy these days? We can eliminate stress, but we can manage IT.

So almost like I have a new Operating system now, like I tend to live more in this .

light stress, less a quest to a clam, your calm a new series from mp s life kit podcast.