ICYMI: At Hearing, Senator Warren Highlights Biden-Harris Administration’s Supply Chain Commitments, Calls for Public Manufacturing of Generic Drugs to Lower Costs for Consumers
Warren: “Public manufacturing presents a powerful opportunity to resolve drug shortages, to secure the pharmaceutical supply chain, and to ensure generic drugs are both accessible and affordable for patients.”
Washington, D.C. — At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) highlighted the need for the public manufacturing of generic drugs to address critical drug shortages and ensure access and affordability of prescription drugs for consumers. Senator Warren pointed to the increasing market concentration among generic manufacturers and its effects on drug shortages across the market.
Senator Warren highlighted recent actions taken by the Biden administration to invest in domestic drug manufacturing and secure the pharmaceutical supply chain. Senator Warren called on the administration to build on its commitment to invest $35 million in domestic manufacturing of key starting materials to also invest in the manufacturing of finished drug products.
“To prevent drug shortages, the Biden Administration…should build on these commitments to also invest in the manufacturing of finished drug products,” said Senator Warren. “And it’s important that the administration ensures that taxpayers get something for these investments, for example by negotiating contract terms that the drugs will be made available to government programs and patients at a fair price if we’re going to put taxpayer dollars into this.”
In advance of the hearing, Senator Warren also reintroduced her Affordable Drug Manufacturing Act, bicameral legislation that would establish an Office of Drug Manufacturing within the Department of Health and Human Services (HHS) tasked with manufacturing select generic drugs and offering them to consumers at a fair price that guarantees affordable patient access.
Transcript: Drug Shortages: Examining Supply Challenges, Impacts, and Policy Solutions from a Federal Health Program Perspective
U.S. Senate Committee on Finance
Tuesday, December 5, 2023
Senator Elizabeth Warren: Thank you, Acting Chair Cardin. I’m really glad we’re having this hearing today because there are more than 300 drugs that are in shortage, meaning drug companies don’t produce enough to meet patient demand. That’s more than any point in nearly a decade.
Shortages can be devastating. They force patients to use less effective alternatives or switch to drugs that may have more harmful side effects. Lots of factors can cause shortages that you all have been talking about today: spikes in demand, a manufacturing facility hit by a hurricane, or an inspection problem that needs to be addressed.
But a big shortage risk occurs when there are only a small number of companies that make a drug and any one problem in one of those companies can take down a chunk of the market. Most drugs in shortage now are generics, meaning they are no longer protected by patents and can be made by any manufacturer. But even though generics can be made by anyone, most have very little competition. In the U.S., 40% of generic drugs are made by one single company.
Mr. Coukell, you represent the nonprofit drug manufacturer Civica Rx, so you understand the economics of the generic drug industry. Why is there so little competition for such a high number of generic drugs?
Allan Coukell, Senior Vice President of Public Policy, Civica Rx: Thank you, Senator. Typically, when a drug goes off patent and companies can bring generics to market, a lot of companies compete to bring that product to market.
Senator Warren: And that was the model we all thought would happen, but –
Mr. Coukell: Right. Unfortunately, what happens is – and when you have purchaser consolidation, contracting consolidation, it drives the price down and concentrates the market share and so the price goes so low that other companies may not have market share and may not have much incentive to stay in the market.
Senator Warren: My understanding is that part of the problem here is that it is expensive to run a drug manufacturing facility, but, as you’re saying, the margin for many of these generic drugs is so low that domestic manufacturers just aren’t interested in making them. As a result, we’ve become more reliant on foreign manufacturers to furnish some of our most basic and essential medicines. This obviously not only raises quality concerns, but it also poses a risk to our national security.
That’s why I was glad to see the Biden-Harris administration announce that it is expanding HHS’s authority under the Defense Production Act to bolster domestic manufacturing of essential medicines and that it will invest $35 million in U.S. manufacturing of key starting materials for pharmaceutical products.
Mr. Coukell, will investments in the manufacturing of key starting materials – that’s a good thing. But will it be enough to alleviate drug shortages, or do we need to also think about investments in manufacturing finished drugs as well?
Mr. Coukell: Thank you, Senator. I agree it is a good thing to invest in key starting materials. If we are focused on shortages, the key starting materials, the precursor even upstream of API are way, way upstream and not usually the thing that’s causing the shortage. Most of the shortages are caused at the level of manufacturing the finished dosage from the vial or syringe drug.
Senator Warren: Alright, that’s a really important point and I appreciate your making it. To prevent drug shortages, the Biden Administration, I think, should build on these commitments to also invest in the manufacturing of finished drug products. And it’s important that the administration ensures that taxpayers get something for these investments, for example by negotiating contract terms that the drugs will be made available to government programs and patients at a fair price if we’re going to put taxpayer dollars into this.
But I’m concerned that even this won’t be enough to fully address the market failures in the generic drug industry. So one more question, Mr. Coukell.
Are there generic drugs at high risk of shortage that are so unprofitable that Civica can’t produce them, but would be able to produce them if you had government assistance and government contracts to do it?
Mr. Coukell: There are certainly drugs that – at today’s prices – any manufacturer, even a non-profit, would be selling at a negative margin. As you can imagine, even as a non-profit you cannot sell very many drugs at a negative margin and continue to operate. So yes, the answer to your question is yes.
Senator Warren: I think it’s important to acknowledge that the market alone won’t fix this problem. If there are drugs that are priced so low that even manufacturers that are dedicated to preventing shortages won’t produce those drugs, then the government must step in. That’s why I’m reintroducing the Affordable Drug Manufacturing Act to direct HHS to manufacture or sign contracts to manufacture generic drugs in cases where the market has failed.
Public manufacturing presents a powerful opportunity to resolve drug shortages, to secure the pharmaceutical supply chain, and to ensure generic drugs are both accessible and affordable for patients.
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