Column | Operations Management

The other supply chain issue revealed by the pandemic: Generic drugs

Column | Operations Management

The other supply chain issue revealed by the pandemic: Generic drugs

Shortly after the COVID-19 pandemic hit the United States in Spring 2020, sourcing personal protective equipment (PPE) became a top priority.

The risks of having 90% of all face masks used in health care settings produced offshore by one country became abundantly clear. During the summer of 2020, HFMA representatives worked closely with the White House Supply Chain Task Force to spread the word about the U.S. Healthcare COVID-19 portal, which continues to serve as the single source of data for the national effort to combat PPE shortages.

Staple drugs in short supply

But PPE is not the only supply chain vulnerability exposed by the pandemic. The generic drug market, with a supply chain heavily sourced from China, is another. Like many other challenges our health care system managed through in 2020, the generic drug shortage was not caused by the pandemic. The Food and Drug Administration (FDA) has been tracking and reporting to Congress on the drug shortage crisis since 2014, in response to drug shortages that had impacted hospitals for years.

In 2018, the FDA convened an inter-agency task force to study the problem, determine the root causes and recommend solutions. The resulting report, issued the following year, pointed to a “broken marketplace” for “low-price, financially unattractive drugs,” particularly sterile injectables. Among the solutions the FDA recommended: promoting sustainable private sector contracts (e.g., with payers, purchasers and group purchasing organizations) to ensure a reliable supply of medically important drugs.

During the pandemic, demand spikes for drugs used to support mechanical ventilation brought a new urgency to generic drug shortage issues. In her testimony before a Senate committee last spring, health care policy expert Rosemary Gibson analyzed the market dynamics underlying the crisis, advocating for public-private collaboration to support domestic generic drug manufacturing and championing a role for small business.

Collaborating on solutions

In the private sector, organizations that had begun finding solutions to generic drug shortages responded to COVID-19 by ramping up their efforts. For example, Premier added six products to its Provide Gx portfolio that have since been delisted from the FDA drug shortage list, building on drug shortage initiatives the health care alliance had begun in 2004.

Additionally, in January 2021, Civica Rx announced plans to build a manufacturing facility in Virginia to produce sterile injectable drugs for hospital use. (Health systems collaborated to create the company in 2018 with a goal of reducing and preventing drug shortages and the price spikes that can accompany them.) 

As health care leaders emerge from crisis mode, there will be no shortage of demands competing for resources and attention. The public health emergency shined a spotlight on the need to diversify the supply chain for the various generic drugs that are vital to the core services hospitals provide. Leaders should take action now to identify strategies and solutions for their organizations. Don’t wait for the next crisis.

About the Author

Joseph J. Fifer, FHFMA, CPA,

is president and CEO, HFMA, Westchester, Ill.


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