If you or maybe your kid has needed a prescription for the popular antibiotic amoxicillin lately. You know that's the bright pink one, Well, you might have had a hard time finding a pharmacy that has it on hand, or any number of other generic medications for that matter. Bloomberg's Ike Sweatlts reports that some of the most in demand generics in the US are increasingly in short supply.
What's significant now is that there's a lot of shortages in a lot of different areas that are all affecting patients. So you have the cancer drugs, you have the antibiotics, you have the ADHD medicines. Each of these areas has seen issues and challenges before. What's unique now is sort of all happening at the same time.
Ike's here to explain why that is, and Health Security reporter Riley Griffin is back to tell us what the US government is doing to try to fix this growing problem.
But it remains to be seen whether or not they will achieve something at the scale of say the Chips Act, which was about bringing chips production back here to the United States. But we have not seen a Chips for pharma. Despite people advocating for it, and despite folks at the White House really thinking critically about all the different ways to approach this problem.
I'm Wescasova today on the big take the generic drug dilemma. Let me just start by asking you the big question, what is causing this shortage of generic drugs in the US.
There have been shortages of generic drugs in the US really for over a decade. There are individual events that might prompt each shortage, whether it's a hurricane or a plant that has to shut down or stop manufacturing because there was some safety or quality issue.
With the drugs.
But behind all of those is the fact that a lot of generic drugs don't make a lot of money, if any money at all, for the manufacturers. And if you have a product that doesn't make a lot of money, there's not a huge financial incentive to maintain a robust, reliable supply chain with a lot of extra empty manufacturing capacity that you can quickly use when something goes wrong.
Generic drugs have been around for a long time and manufacturers have been able to turn a profit making them. Why have they become unprofitable now to the point where there are shortages.
When the idea of generic drugs was introduced. You know, it was supposed to be that the company that invented a medicine was going to get some sort of patent protection on it for a little while.
They make a lot of money during that time.
To recoup their research and development costs, and then the drug goes generic. A lot of other companies can enter the market and produce their own versions at a much lower cost of patients. The whole idea behind generic drugs is that they're supposed to be cheaper for patients.
The problem comes when.
The cost of the generic drugs falls so low that their manufacturers can't cover their cost of production. And there are a lot of reasons why prices and cost of generic drugs have been going down and down. Partially, it's sort of baked into the system. So all generic amoxicillin, for example, this antibiotic the most popular antibiotic in the United States. They're all supposed to be equivalent to each other. That's what the FDA says. You go into a pharmacy,
you fill a prescription for amoxicillin. You don't ask for a ma oxiscillin from this manufacturer that manufacturer. You just fill the prescription. They give you whatever generic they happen to have. So the only thing that generic drugs are really competing on is on the price. There's also consolidation among the companies that per chis generic drugs, especially for pharmacies.
So there's basically.
Three or four large buying groups that buy about ninety percent of all of the generic drugs that are dispensed in retail pharmacies you know, CVS Walgreens in the United States, And because there's only a handful of them, they have a lot of power in the market, and that power helps drive down the cost and price of those drugs.
Like like you mentioned, amoxicillin is one of the drugs that's in short supply. I think anyone who's had a kid or was a kid knows all about a maxicillin. It's so widely used. But what other medicines are also in short supply.
There's a lot of cancer drugs, chemotherapy, medicines that are in short supply right now. That's one big category. Then there's the drugs that you pick up at the pharmacy, antibiotics, a lot of medicines for ADHD, other antibiotics other than a maxicillin. You know, the latest data that we have from the University of Utah's service, there tracking three hundred and five drugs that are in short supply. That's the
highest it's been since twenty fourteen. But what's significant now is that there's a lot of shortages in a lot of different areas that are all affecting patients. So you have the cancer drugs, you have the antibiotics, you have the ADHD medicines. Each of these areas has seen issues and challenges before. What's unique now is sort of all happening at the same time.
And you report that part of the challenge for US manufacturers is increased competition from overseas, where they're able to get the ingredients and manufacture the drugs much more cheaply.
Yeah, there are different labor costs, there's different energy costs. That's sort of been happening, i would say over the past few decades. That's not something that's just new right now, but that is definitely something that has on one hand, made a lot of these medicines more accessible physically and financially for people all around the world. It's also made it more difficult for some manuft as to keep up financially and keep producing the drugs, and.
So why is it important that these drugs have to come from US makers. Why can't we just shift to buying more foreign antibiotics and other drugs.
Well, that depends on who you ask, So some people would say that that's totally fine.
You know, that's just part of the globalized supply chain.
Things are made in different places, and what we really need to do is work to reduce the barriers from getting the medicines from point A to point B. Another argument is that it's important for countries to be able to provide medicines for the health and well being of the people who live there and in times of international conflict or international crisis global pandemic, for example, we saw earlier in COVID some countries restricting the export of medical products,
and so having medicines and having the ingredients to make those medicines available in the country might be helpful in that situation, or having policies that would allow those products to be bought and sold even in those more extreme situations. More domestic manufacturing of generic drugs is not something that everyone is calling for as a solution to these drug shortages.
In fact, people are pointing out that domestic US manufacturing plants can have the same problems that plants outside the United States can have.
And so what are the practical effects of having these shortages. Do you have to just switch to a different kind of say, antibiotic, or are you just able to find it overseas even if you aren't able to find it in the US.
So it depends on what sort of medicine it is.
So for antibiotics, there are other antibiotics other than amoxicillin, for example. The problem is last year, when a lot of these maxicillin shortages started, the companies that make those other antibiotics were not anticipating in a maxicillin shortage that would then lead to a run on their products. So when patients couldn't find a ma oxicillin, their doctor might give them a prescription for another type of antibiotics, say a different kind of penicillin. But then people started filling
those prescriptions for all those penicillins. After that, then there was a diminished supply of those penicillins, and one of those is basically the only treatment for pregnant people with syphilis. And now that penicillin is a lot harder to find and making it more difficult to treat those folks. So there's sort of those like knock on effects of yeah, maybe in an individual case you can fill the prescription with something else, but that leads to a shortage down
the road. There's another problem, especially with antibiotics, which is that you're really.
Supposed to use the most specific.
Antibiotic that you can because you want the antibiotic to kill the bacteria that you've got.
You don't really want it to do anything else.
If you use sort of a general antibiotic that's maybe not quite as good at killing that particular bacteria, what happens is the bacteria will develop resistance to that antabatic, and then that antibatic becomes much less effective in the future.
In your reporting, you write about an American company called US Antibiotics, and they're facing a lot of the things you're describing here. Can you tell us about that company?
So that company started a few years ago when they purchased what at the time was the only plant in the United States making a maxicillin. That plant used to make enough a maxicillin for everyone in the United States who needed it. It was opened in the seventies in Bristol, Tennessee. You know what, its peak had five hundred or so employees. Back then, this was a brand product, more financially lucrative.
The drugs went generic. The plant changed hands a few times over the past fifteen years, and the company that owned it most recently before US Antabatics a few years ago went into bankruptcy and US Antibiotics bought the plant out that they knew that this was going to be a challenge. The company that bought it is a subsidiary of Jackson Healthcare, which is mostly a medical staffing company.
And Rick Jackson, who runs Jackson Healthcare, told me he bought this sort of more out of what he felt was like a civic duty to keep it open and keep it running. He bought this plant knowing that it might not be the best business opportunity, but he wanted to make sure that a marxicillin was going to continue to be produced in the United States.
And how'd that work out for him?
Well, so far, the plant, you know, it's still running. He said that it's losing a lot of money, and he is hoping that the US government will commit to purchasing drugs from there to sort of provide a dedicated revenue stream and allow him to keep it open.
And the future of this plant really hinges on that.
And you went to see this plant, where was it?
Like? It's a giant facility.
I think it's three hundred and ninety four thousand square I've been writing for months about how patients hadn't been able to fill prescriptions, and I go and see a huge amount of the active pharmaceutical ingredient in the warehouse there. It was a pretty empty place compared to what it could be. There was equipment there that was just sitting under plastic. It wasn't being used anymore. There were areas of the plant that had been closed off a while ago.
This is a highly regulated field and there's a lot of things you have to do in exactly the right way all the time, and that costs money, and that takes time to train people to do.
So if they're losing money, how can they continue to stay in business?
Rick Jackson Jackson Healthcare said he's providing funds for this, but he's not going to subsidize it forever. So I think that the future of the plant is up to how much money they're able to make selling to the government or selling to drug distributors in the commercial market.
After the break. Is the US the only country facing this drug shortage problem? We hear a lot of these days about the Biden administrations push to bring manufacturing back to the US computer chips, electric vehicles, and batteries. Are there any incentives like this where the US government is giving money to pharmaceutical companies drug manufacturers to make these kinds of drugs that are in short supply.
Yeah.
The Biden administration has said that domestic production of pharmaceuticals, of medicines, and of the raw ingredients are critical. When they announced the Infrastructure Plan several years ago, talking about the need for more support for semiconductors for electric vehicle batteries,
they included pharmaceuticals and medicines in that push. We haven't yet seen the large, multi billion dollar subsidy packages coming out of Congress to support that in a way that we have for batteries and forced conductors.
I've talked to.
Folks about this, and one reason people have given is that it is politically unpopular to support the drug industry. And there's been a lot of attention over the last several years on high drug prices, often those high drug prices are brand medicines protected by patents.
New drugs or maybe old drugs, they're still protected by patents.
So politicians have been doing a lot to try to reduce the cost of health care. Healthcare is incredibly expensive and it might not look very good for a politician to stand up and say, Americans, you should be paying more for your medicines. And that makes it difficult to get money to these manufacturers of generic drugs. So making a lot of generic drugs in the United States would cost more than making them outside of the United States,
and that money's got to come from somewhere. It could come from patients paying higher insurance prema, that could come from hospitals paying more for the drugs. It could come from the government subsidizing it.
If the US does decide to spend some of this money to give incentives to US manufacturers to make these drugs in short supply, would that actually help ease the shortage.
So there are some folks who are trying to establish manufacturing plants here and they say, we just need some money from the government to sort of get this going, and then once we have it going, then we can sustain it. I think folks are worried about the government just sort of spending a lot of money on a maxicillin, Like, right now, here's this acute problem. The government's just going to put all this money into it, and that might not have the long term.
Impact people are looking for.
But I think that people are still actively debating a lot of these proposals, and that Congress hasn't passed any legislation. There haven't really been any big changes in the last year or so on.
This is the US the only country that's suffering with these kinds of shortages. What about countries in Europe, Asia and elsewhere.
There are shortages all over the place.
Other countries in Europe have been spending money to try and boost domestic production. And I think also important to remember a lot of these medicines are just not available in many parts of the world, So I think that's an important point too, and something that low cost generic drugs have been really good for getting medicines to places that otherwise might not have them period.
Iik, you're watching this pretty closely as you continue to report in the story. What are you looking for?
I am curious what the US government is going to do and what's going to make this different than situations we saw ten fifteen years ago. There was a big shortage of cancer drugs. Back eleven twelve years ago or so, there were congressional hearings, there was an executive order, there was political attention.
Now we're seeing it again.
Right before the COVID pandemic, the FDA put out a report looking at some of the root causes of drug shortages, and a number of things identified in that report were economic issues. And the FDA, who regulates the safety and effectiveness of medicines, it's not going in and setting prices for drugs.
I guess I'm curious what's going to be different this time around?
Hike, thanks so much for coming on the show.
Thanks for having me.
Now let's hear what, if anything, can be done to ease these shortages. Riley Griffin is Bloomberg's health security reporter. Riley, it's good to see again.
Thanks for having me.
Wes, So maybe you can paint us a picture of what the I guess you'd call it global economy for generic drugs.
Looks like the Food and Drug Administration, our regulator here in the US, overseas, the safety of more than two point one trillion worth of food, tobacco, and medical products produced in the US and abroad, and these sectors account for one fifth of the nation's economic activity. Just picture that for a moment, a regulator that oversees one fifth
of the nation's economic activity. So the problem is, of course, that not all these pharmaceutical products are made in the US, and it becomes increasingly difficult to do that oversight work of products coming in for abroad. So I'll share some data with you straight from the mouth of the FDA. Seventy one percent of US biologic sales that kind of
more complex drug are actually imports. These aren't the typical pills in your medicine cabinet, but the complex medicines you often get in an injection developed from blood, proteins, viruses, or living organisms. Seventy eight percent of manufacturers that make active pharmaceutical ingredients are located outside of the United States. And these are the materials that allow a drug to have the desired effect in the body. It's the part
of the recipe that really makes the drug work. And back in twenty nineteen, about one fifth of API manufacturers were in India and thirteen percent were in China, but that's likely to have increased since then. India's pharmaceutical industry, for example, is only growing. It's the world's largest producer of generic drugs, and that's a fifty billion dollar industry over there.
So given all of that and the shift of drug manufacturing to Asia where they're able to make more of it for cheaper, why are we having shortages?
There are a lot of different reasons for drug shortages. The primary one, FDA says six and ten drug shortages are caused by quality problems, So that might be a contamination and a batch or a lack of appropriate active pharmaceutical ingredient. There are a lot of different reasons that can spur a manufacturing or quality issue, but that is the biggest driver.
And so when a drug has to be pulled out the market because of a quality problem, do they relatively quickly fix it and get it back on the shelves?
No wes. A year and a half is the average duration of a drug shortage. According to a Homeland Security and Government Affairs Committee report, sixty percent of drug shortages are caused by underlying quality or manufacturing issues. If there is something so severe that a product has to be pulled from the market, it could be a while before a shortage is resolved. Another reason for shortages is outright discontinuation.
So say you used to have five producers of a specific generic drug and two of them get out of that business because it's no longer profitable for them. That's fewer production to meet the demand that exists. And then another one might be delays that are faced. Maybe you're not necessarily keeping up with a surge in demand over say respiratory season, which we're now entering. If a lot more people are seeking a certain drug and there's only so many manufacturers, they might not be able to keep
up with demand too. So lots of different reasons for drug shortages in the US. And I want to be clear even as we discuss some of the challenges that FDA has an oversight of the pharmaceutical supply chain that exists abroad. That's not to say there aren't those quality issues here in the United States as well. So it exists in both places. And one of the underlying problems is a lot of these companies don't have the money
to invest in advanced manufacturing, in automating systems. They leave room for human error and to upgrade the facilities so that it runs like a tight ship. Like over at Pfizer where they make the vaccine, they don't have Pfizer's money, they can't make those same investments. Pfizer has invested so much money in production of the COVID vaccine with many facilities here in the United States. That is a product that has made tens of billions of dollars on an
annual basis. The COVID vaccine and its COVID therapeutic doubled its revenue in a single year, so they can feed that money back into the process. With generic drugs that only cost cents on the dollar or a few dollars at that, you don't have the same capital to reinvest in the manufacturing process, and a lot of companies end up cutting corners.
Are there safety risks to having so many of the drugs that we take manufactured overseas where say the FDA doesn't have as much oversight into them, or is that not really a problem?
It is increasingly a problem, and it's one that we at Bloomberg have taken a lot of time to examine this year. There is evidence of generic drug makers abroad cutting corners to keep costs down and evade being caught for quality issues. So this year alone, our colleagues have written about contaminated eye drops, poisoned coft syuroup which is over the counter, and low quality abortion pills. I mean, there are a number of cases the FDA would say,
trust your generic drugs. But Congress is certainly looking at this question and pushing for more inspections abroad and other forms of oversight and investment that will ensure quality moving forward.
When we come back, will the Biden administration give a boost to generic drug makers? So if there is an advantage both from a production standandpoint and for quality control to have these medicines made in the US, but US manufacturers can't afford to make a lot of them, what's the solution here? How do we actually solve this problem?
I wish I had the conclusive answer to that question. A lot of different stakeholders are now coming to the table, particularly because of these acute drug shortages that have affected life saving medicines like chemotherapies or basic antibiotics, to present a solution. Many Congress people are pulling together legislation right now to bolster US domestic drug production, and some of the ideas include US health programs awarding contracts to US
based companies. That's one idea floating out there, calls to actually increase prices of generic drugs. It's funny to say that aloud, given so much of the discussion is about lowering the cost of brand name pharmaceuticals, but again, this is a totally different beast. Another is improving transparency in the supply chain, simply having better data as to where
the supply is coming from up and downstream. We don't want to just know where the generic is produced, we want to know where the active pharmaceutical ingredients that underlie that generic are made, and even the raw materials beneath that. Having more visibility into the supply chain and a sense of how many manufacturers exist, where they are, what kind of quality issues they may have had in the past, goes a long way to ensuring the security of the
supply chain. Another would be then taking those manufacturers and ensuring they are properly registered with the FDA, And then of course talk of grants, tax incentives, and loans.
We've also seen from the Biden administration a lot of money to try to bring them manufacturing back to the US. Is there any thought of putting that kind of incentives into generic drugs as well.
Earlier this year we reported on a secret White House effort to tackle this very qui question of how to resolve drug shortages and underline quality issues that are driving them. The team was formed by two White House bodies, the National Economic Council and the Domestic Policy Council, with support from other parts of the White House, and they were really looking at this as a economic question, how do we support industry. Some of the things that they were
thinking about were these tax incentives grants. Another novel concept was doing third party quality assessment, saying, hey, are there outsiders that we can bring to the table that can examine the pharmaceutical supply chain and say we see a problem here. But it remains to be seen whether or not they will achieve something at the scale of say chips, the Chips Act, which was about bringing chips production back
here to the United States, among many other things. But we have not seen a Chips for pharma, despite people advocating for it, and despite folks at the White House really thinking critically about all the different ways to approach this problem.
So we have a secret task urse inside the White House. Why does it have to be secret?
That's a good question, Wes.
No answer there, No answer.
There, sirre Lely, I got to ask you. You must be a whole lot of fun to watch TV with when a pharmaceutical ad comes on.
Oh yeah, oh yeah.
I mean many of those drugs I knew like the back of my hand for a while, because that's what my beat was at Bloomberg was reporting on the blockbusters, the new to market drugs that were trying to reap as much as they could in sales in that specific window before patent expires. You will never see it and add on television for a generic drug. It's just not
how it works. So if you're seeing something on TV that is a brand name product that has got a totally different business model than the generics that might be in your medicine cabinet.
Riley always great talking with you. Thanks for taking the time, Thanks Wes, Thanks for listening to us here at the Big Take. It's a daily podcast from Bloomberg and iHeartRadio. For more shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen and we'd love to hear from you. Email us questions or comments to Big Take at Bloomberg dot net. The supervising producer of The Big Take is Vicky Bergolino. Our senior producer is Katherine Fink. This episode
was produced by Sam Gebauer and Christine Driscoll. Hilde Garcia is our engineer. Our original music was composed by Leo Sidrin. I'm West Kasova. We'll be back tomorrow with another Big Take