28 Mar The broken market for medicine
Shortages can mean switching to less effecitve drugs and facing worse outcomes.
Medical shortages recently reached record highs across countries in Europe and hit a 10-year peak in the US last year. The problem is recurrent and widespread: in 2022 and 2023, national pharmacy bodies across 26 European countries all reported shortages, with the pircutre worsening last year.
While bie pharma companies focus on developing innovative drugs that they can sell under patent and at high margins, recouping research and development costs, off-patent generic medicines such as methotrexate make up the backbone of pharmaceutical care. Ninety-one per cent of drugs prescribed in the US and 70 per cent in Europe are generics and biosimilars, a more complex off-patent drug.
Despite their essnetial role in global healthcare, manufacturing issues, weak suply chains and low pricing have combined to create a “broken market” for these medicines that makes them unattractive to produce and vulnerable to supply shocks, quality defects or sugres in demand.
“The whole system has a just-in-time principle and any rupture in that causes a downstream shortage. But the quality measures are so high and it’s so regulated that if there’s a quality defect, its’ harder for other suppliers to step in than in other industries.”
In the UK, 99 generic drugs were short in January, doublbe the number counted two years ago. This has affected supplies of drugs like hromone repalcement therapies and medicines for ADHD, partly due to spikes in demand.
There is liminted ata to track shortages in lower-and middle0income countries. But they are unable to compete on price with richer nations.
For patients, shortages ultimately translate into less effective treatment. Shortages lead to treatment delays, diseases complications, and even risk of death. In richer countries, systems are foten better equipped to adapt by sourcing drugs from elsewhere or using alternatives. Yet three quarters of European national pharmacy groups surveyed last year said that shortages had led to worse treatment, and 15 per cent said they had led to adverse events such as more side effcects.
The first phase of durgs manufacturing involves making active pharmaceutical ingredients (APIs) through processing, refining and purifying chemical compounds. The API and other inactive ingredients such as preservatives are then converted into finished dosages udring the second stage of manufacturing, typically at separate facilites. The finished drugs are then shipeed to distribution cetnres.
For both manufacturing stages, the world relies heavily on Indian and Chineses factories, due in part to lower production costs and a higher skill base. Indian and Chinese manufactures own over half of the quality certificates needed for drug APIs to be used in Europe and 48 per cent of the certificates for those used in key oncology drugs.
Like globalised supply chains for other goods, this adds an element of uncertainty.
Reliance on Chinese factories for active pharmaceuticals ingredients contributed to sustained shortages of antibiotics in Europe in 2022, partly due to zero-covid restrictions in China. Faults at an Indian finished dosage factory were instrumental in the recent shoarge of methotrexate.
While each shortage has different causes, the hit to methotrexate underlines several problems with the generic medicines in the industry. First used to treat cancer in children in 1949, methotrexate is also used for psoriasis, rheumatoid arthritis and Crohn’s disease. But the highest doses most frequently in shortage are for cancer care, including for actue lymphoblastic leukaemia and non-Hodgkin lymphoma, a cancer of the lymphatic system.
Unusually, around 80 per cent of methotrexate API is made in Europe and according to Excella, there is, and was, no shortage for methotrexate API.
An Indian pharmaceutical manufacturer, Intas, is a major supplier of finished dosage methotrexate to the US through its subsidiary Accord Healthcare. In 2022, Accord provided 35 per cent of the Us’s methotrexate supply as well as more than hlaf of the US supply of other key cancer drugs: carboplatin and cisplain.
When FDA inspectors visited the Intas plant in Ahmedabad making methotrexate and other oncology durgs in Novermber 2022, it found a “cascade of failure”.
After the inspection, Intas suspended production to address shortcomings. Within six months, this had sparked a scramble for the key cancer drugs produced by the plant. Shortages then rippled through global markets, as the US sought to find supply from elsewhere.
In August last year, the European Medcines Agency reported shortages of methotrexate in 11 EU countries. Manufacturing issues at several European suppliers lay behind the shortages.
But the incident revealed “inherent structural weakenesses” in the market for steril einjectable drugs such as methotrexate. One manufacturer had very aggressively gained market share over the last several years and they did it by competing on price. The price of a methotrexate injection in the Us was $21.80 when FD inspectors visited the Intras plant in December 2022, down from $26.30 at the beginning of 2019. Methotrexate’s list price has since risen to $28.40 per dose but the price of an average sterile injectable durg is $90.
In Euope, prices are lower still. The Dutch list price for 50mg is aroud €10.
Intas has since resumed supply of oncology drugs to the US, but the company and its competitors have not been able to ramp up capacity and shortages will not be resolved for serveral months.
Pfizer, a supplier of methotrexate to 40 countries, is increasing production at sites in Australia, but this requires investing in more staff, specialist equipment and manufuacturing capacity, measures that can take 12 to 18 months to affect supply.
Meanwhile, low prices have pushed out competition and prevented newcomers from entering the market.
The shortages has also led to scrutiny of how healthcare systems buy durgs. The Federal Trade Commission last month launched an inquiry into the role played in the shortage by so-called group purchasing organisations, which buy generic drugs for Us hospitals and other healthcare providers. THe FTC will assess whethere these “opaque drug middlemen” disincentivise suppliers.
In Europe, most systems rey on tendering for contracts to supply durgs, meaning the lowest bidder can often secure large amounts of supply. Tendering based solely on price or in a “winner takes all” agreement can “create monopolies in the market and you can rely entirely on one particular company. The moment something goes wrong, whether it’s quality recall or a manufacturing issue or they can’t meet demand, everything goes bust”
The severity of the methotrexate shortage has since abated. But experts say that more people will probably be affected by durg shortages in the near term, as the underlying causes remain unaddressed.
FDA inspections of international plants dropped sharply during the covid-19 pandemic.
Longer term, as populations age and chronic conditions rise, global growth in demand for medicines is likely to put further strain on supply chains.
Lower-middle-income and upper-middle-income countires will also make up the vast majority of demand for methotrexate does in the years ahead. Drug shortages disproportionately affect people living in low-income countreis, where shortages of personnel and funding limit capacity to prompty identify shortages, acquire emergency supplies and register new products.
Problems with supply are likely to continue as generics companies do not have a commercial interst in amking older, complex durgs like altephase and methotrexate.
While doctors raise conceerns about the effects of supply bottlenecks on patients, policymakers are discussing the geopolitical risks of Chinese and Indian supply. A goal of an upcoming Critical Medicines Act form the European Union is to reshore some suppy and encourage drug stockpiling.
Currently, there is little incentive for manufacturers not to source from cheap factoreis in Asia. To reshore manufacturing, healthcare systems will ultimately have to pay more for their drugs,at a time when national budgets are increasingly stretched. In the end, pricing rules again.
No Comments