Investigating the Effects of Drug Deficits in the Realm of the Generic Pharmaceutical Market
The U.S. generics industry is grappling with persistent drug shortages, affecting a wide range of medications from simple pain relievers to life-saving drugs like cancer chemotherapy agents, antibiotics, and epinephrine. The Drug Enforcement Administration (DEA) regulates the production levels of controlled Active Pharmaceutical Ingredients (APIs) and requires manufacturers to provide actual sales data to develop demand requirements, yet shortages continue within the market.
Several key factors contribute to these shortages. One of the primary issues is the collapse of domestic production and overreliance on imports. The decline in domestic generic drug manufacturing has led to a significant overreliance on foreign suppliers, increasing the risk due to potential supply chain disruptions and exposing the U.S. to geopolitical uncertainties. The U.S. is heavily dependent on a small pool of dominant foreign suppliers, which can lead to single points of failure and exacerbate shortages.
Another significant factor is the "race to the bottom" pricing strategy, where the cheapest supplier wins, leading to very low profit margins for manufacturers. This discourages investment in new or existing manufacturing facilities, making them vulnerable to disruptions. As a result, multiple manufacturers consolidate into a single supplier due to low demand and margins, creating an increasingly fragile supply chain.
The generics industry also faces regulatory and infrastructure challenges. There is a critical lack of transparency in reporting manufacturing issues, making it difficult to anticipate and prepare for potential shortages. Outdated systems for tracking and reporting supply chain disruptions hinder proactive measures to mitigate shortages.
Demand and supply imbalances also play a role in the ongoing shortages. Growing demand for certain medications, such as ADHD drugs, due to improved diagnosis and treatment rates, exacerbates shortages. The recreational use of prescription medications can further reduce supply available for legitimate medical needs.
The American Society of Health-System Pharmacists (ASHP) has suggested policy solutions to address the drug shortage crisis, which generic companies can use as a foundation for their risk management strategies. Generic companies can take immediate steps to manage and mitigate risk, such as assessing and updating risk management strategies, employing strong supply chain processes, improving data sharing, ensuring compliance with Current Good Manufacturing Process (CGMP), exploring partnerships with 503B outsourcing facilities, and investigating expiry date extension.
The FDA requires manufacturers to provide actual sales data to develop demand requirements, but shortages continue within the market. From 2017 to 2021, the FDA received 731 manufacturer "supply chain issue reports," with 113 drugs having a "meaningful" shortage. The Department of Health and Human Services has also provided policy considerations to prevent drug shortages and mitigate supply chain vulnerabilities in the United States.
Generic companies can improve the predictability of supply chain risks by implementing a solid material planning and reconciliation process, Integrated Business Planning (IBP)/Sales & Operations Planning (S&OP) process, and leveraging data to share and improve transparency on causes of shortages. The generics industry is significantly impacted by drug shortages, with central nervous system (CNS) agents, antimicrobials, hormone agents, chemotherapy, fluids, and electrolytes being the top five affected classes.
The ASHP's initial investigation has shown that in 60% of cases, manufacturers do not know or do not provide reasons why their drugs fall into short supply. Economic pressures and broken contracts have caused recent shortages in the generic medicine supply chain, as many generic drugs are discontinued due to quality and reliability failures, making the product unprofitable for the company.
In a bid to address these challenges, the U.S. Pharmacopeia has identified the need for increased transparency, collaboration, and investment in the generics industry. The FDA, DEA, and other regulatory bodies continue to work towards ensuring the availability of essential medications and addressing the root causes of drug shortages in the U.S.
- To combat persistent drug shortages in the generics industry, consulting firms specializing in pharmaceuticals, technology, and life sciences can help by devising innovative ERP strategies to improve manufacturing operations, supply chain management, and quality management.
- SAP solutions could be a valuable asset for generic companies, as they offer robust tools for demand forecasting, which would aid in maintaining appropriate inventory levels and avoiding shortages.
- In collaboration with retail and consumer product sectors, generic companies can implement health-and-wellness initiatives to promote the responsible use of medications, thus improving overall supply availability for legitimate medical needs.
- By partnering with life sciences and science researchers, generic companies could invest in research and development to decrease their dependency on foreign suppliers and reduce the risk of single points of failure in the supply chain.
- To increase transparency and improve data sharing, generic companies can leverage technology-driven solutions for reporting manufacturing issues and tracking supply chain disruptions more effectively.
- By implementing a solid material planning and reconciliation process, adopting Integrated Business Planning (IBP)/Sales & Operations Planning (S&OP) process, and collaborating with 503B outsourcing facilities, generic companies can enhance the predictability of supply chain risks and address potential shortages proactively.
- Stakeholders in the generics industry, including manufacturers, regulatory bodies, and consumer groups, should work together to prioritize increased transparency, collaboration, and investment to ensure the availability of essential medications and address the root causes of drug shortages in the U.S.
