Magazine Article | January 31, 2020

An Analysis Of The FDA's Drug Shortages Root Cause Report

Source: Life Science Leader

By Madeleine Giaquinto & Cynthia Schnedar

In June 2018, a group of 135 bipartisan members of Congress wrote a letter to then FDA Commissioner Scott Gottlieb, M.D., requesting that the drug shortage crisis be urgently addressed. In response, the FDA established a cross-agency task force that included members of partner agencies, including the CMMS, the DoD, the Department of Veterans Affairs, the FTC, and senior officials from the Department of Health and Human Services.

Once assembled, the task force formed a team of economists and scientists to analyze drug shortage patterns of 163 drugs between 2013 and 2017. This analysis uncovered economic forces as the root cause of drug shortages and found there to be an increase in both the number of ongoing shortages, as well as their duration. At the conclusion of its review in October 2019, the task force published its report Drug Shortages: Root Causes and Potential Solutions.


The task force first found that a lack of incentives to produce less profitable drugs exists in the drug manufacturing marketplace. This includes unfavorable pricing dynamics, such as various sectors of healthcare merging to increase negotiating power with buyers and suppliers. Additional factors that contribute to unfavorable contracting practices include price sensitivity among healthcare providers, a lack of communication among high-volume drug buyers regarding the value of reliable drug supplies, a heightened need for capital investment in generic drug manufacturing, and business uncertainty due to the extremely competitive prescription drug market. Current contracting practices have, thus, created a disincentivized environment for manufacturing less profitable drugs, which diminishes motivation for investing in a healthy supply chain capacity.

Second, it was found that mature quality management systems lack a quantifiable value in drug manufacturing. Although drug manufacturers are required to maintain compliance with cGMPs to distribute drugs in the U.S. market, such standards are only the floor of quality management requirements and do not reward a holistic quality culture or mature quality management systems. Several factors contribute to the market’s inability to reward quality management systems, including existing challenges in assessing quality, a lack of transparency across the supply chain to allow consumers to link drug products back to manufacturers, and a lack of information about the effectiveness of quality (i.e., an inability to quantify potential cost reduction created by quality management systems). Because the market does not reward manufacturers for developing advanced levels of quality management, beyond threshold requirements of cGMPs, manufacturers have no incentive to update technologies and processes designed to detect and prevent the quality problems that culminate in drug shortages.

Third, the task force identified a lack of regulatory harmonization across the global industry or, rather, the existence of logistical and regulatory challenges in recovering from foreign supply chain disruptions. An increased use of contract manufacturers and overseas production has created disjointed supply chains involving multiple regulating agencies. This often means manufacturers experience financial, technological, and sourcing hurdles when expanding production capacities or changing API sources. Although approved API manufacturing facilities are listed in the FDA’s Inspections Classification Database, complete information about API suppliers remains unavailable, making it expensive and time consuming for manufacturers to respond to disruptions in supply chains. The complexities of changes in API sourcing are made even more burdensome by the fact that a significant 88 percent of API manufacturing sites are located in foreign countries, making quality management of drug products more uncertain and, consequentially, making the supply chain more vulnerable to drug shortages.


The task force first recommended creating a shared understanding of the impact of drug shortages and the contracting practices that contribute to them. The lack of information about the impact of shortages, across public and private sectors, restricts development of any degree of measurability (e.g., their duration, frequency, or scope). Industry’s lack of understanding also inhibits motivation to invest in developing more reliable supply chains, especially for generic drugs. Areas most in need of data collecting include the quantification of the harmfulness of drug shortages to patients and more precise classification of shortages (i.e., characterizing shortages in terms of frequency, persistence, intensity, and impact). Greater granular understanding around the effects of shortages may help address the first root cause.

The creation of a rating system to incentivize drug manufacturers to invest in mature quality management systems also was recommended. With quality problems accounting for 62 percent of drug shortages between 2013 and 2017, this recommendation is aimed at incentivizing the development of robust, mature quality management systems to ensure a stable drug supply chain. A rating would be given to a manufacturing facility based on an evaluation of its quality management systems. A pharma could then voluntarily disclose this rating to the public in order to gain a competitive advantage in the marketplace. The rating could also be leveraged by group purchasing organizations and purchasers when entering into contracts with manufacturers, injecting greater transparency into the marketplace. Although no such rating system currently exists for drug manufacturing facilities, the report mentions essential elements of an ideal mature quality system, including upgrading facilities and equipment, training manufacturing workers, providing education about products and manufacturing processes, and using statistical-based tracking of manufacturing processes. Factors that could be integrated into the proposed rating system have been studied and considered by several organizations. Manufacturers must be willing to champion the rating system and disclose facility ratings. Doing so will further allow market transparency and create opportunities to reward mature quality management systems.

The task force lastly recommended promoting sustainable private sector contracts by encouraging thorough information sharing about unfavorable contracting practices. This possible solution is one that requires engagement of both private and public sectors because it involves the need to shift financial risk away from manufacturers, especially manufacturers of less profitable generic drugs.


In tandem with the task force report, several legislative proposals and other FDA initiatives are currently aimed at preventing and mitigating drug shortages. The FDA recommended, in a legislative proposal in the president’s FY2020 budget, possible heightened requirements around data sharing of manufacturing interruptions and expanded FDA authority to impose penalties for subsequent inadequate notice. The FDA also recommended a legislative proposal to expand its authority and require certain application holders to conduct risk assessment and risk management exercises for vulnerabilities in the manufacturing supply chain. Finally, the FDA recommended a legislative proposal to lengthen expiration dates of certain drug products, with the goal of reducing the need to discard recently expired drugs unnecessarily, to prevent exacerbating drug shortages.

In addition, the finalization of ICH Guideline Q12 in December 2019 created an enhanced set of tools to incentivize the modernization of prescription drug manufacturing processes and equipment. Previously, manufacturers faced stringent regulatory oversight and financial burdens to make post-approval manufacturing changes, which inhibit responsiveness to supply chain disruptions. These initiatives complement efforts of the task force, doubling down on its strategy to prevent and mitigate drug shortages at their root cause.

It is evident the FDA places a high priority on addressing drug shortages. Although economic drivers of shortages are complex, requiring engagement of all stakeholders throughout the healthcare system, FDA leadership is seemingly focused on redefining quality culture norms in its regime against drug shortages. In December 2019, Janet Woodcock, M.D., director of the Center for Drug Evaluation and Research, testified before the House Energy and Commerce Committee on oversight of the U.S. drug supply chain, where she emphasized the FDA’s position that encouraging industry investment in mature quality management systems could better equip manufacturers in preventing quality problems that create supply chain disruptions.

Regardless of the FDA’s approach, it is clear drug shortages continue to harm patients, both in worsening health outcomes and raising costs of medicine and treatment. The task force report highlighted possible solutions to root causes of drug shortages; however, how these solutions are ultimately implemented into the healthcare system will be something to watch for in the coming years.

MADELEINE GIAQUINTO is manager of regulatory affairs at Greenleaf Health.

CYNTHIA SCHNEDAR is executive VP of regulatory compliance at Greenleaf Health.