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Policy Considerations to Prevent Drug Shortages and Mitigate Supply Chain Vulnerabilities in the United States

Publication Date
Office of the Secretary (OS) with input from ASPE, CMS, FDA, ASPR, and ASL


Key Highlights

  • Drug shortages impact patients, families, caregivers, pharmacists, hospitals, nursing homes, hospices, and other individuals and entities across the health care system.

  • Drug shortages are a decades-old problem arising, in part, from market forces that touch stakeholders across the drug supply chain—providers and pharmacies, manufacturers, and the middlemen in the system. Key issues include a broad lack of transparency, concentration among middlemen, and prices for generic drugs that are driven to levels so low that they create insufficient incentives for redundancy or resilience-oriented manufacturing, distribution, and purchasing. These market failures lead to pharmaceutical supply chains that are brittle, disruption-prone, and too slow to recover from shortages.

  • Supply chain resilience involves fostering processes that are less likely to face disruptions, as well as establishing the ability to withstand and mitigate disruptions so their impact—when they occur—is limited. This resilience also comes from diversification of supply—both in redundancy of manufacturing capacity and a balance of domestic and diversified foreign sourcing—and the presence of reliable, efficient, and sustainable, robust manufacturing practices.

  • The Department of Health and Human Services (HHS or Department) has made significant strides in shoring up the system’s ability to respond to shortages. Nevertheless, more impactful and enduring solutions require additional statutory authorities and funding to resolve underlying causes of shortages. All supply chain participants play a part in these solutions.

  • This paper describes policy concepts for consideration, including collaboration with the private sector to develop and implement a Manufacturer Resiliency Assessment Program (MRAP) and a Hospital Resilient Supply Program (HRSP). As described, the combination of these programs would bring transparency into the market, link purchasing and payment decisions to supply chain resilience practices, and incentivize investments in supply chain resilience and diversification in the supply chain—including domestic manufacturing—at a scale that would drive impactful change in the market. This paper focuses on generic sterile injectable medicines used in inpatient settings, given their importance to acute inpatient care, and their relative risk of supply disruptions—though HHS recognizes that these challenges affect other products, and therefore, the solutions described here may be applicable in other markets. 

*This content is in the process of Section 508 review. If you need immediate assistance accessing this content, please submit a request to Sharon Arnold, Content will be updated pending the outcome of the Section 508 review.