A bipartisan Senate panel is introducing legislation to tackle the mounting crisis of generic prescription drug shortages.
“It’s unacceptable that America is consistently running out of affordable and essential generic medicines,” Senate Finance Committee Chairman Ron Wyden (D-OR) said Friday in a press statement. “Our bipartisan proposal uses the power of Medicare and Medicaid to ensure the entire American health system has adequate supply for key medicines across the country.”
The Medicare Drug Shortage Prevention and Mitigation Program would create new incentives for industry drug purchasers, including hospitals, physicians, and group purchasing organizations, to change their buying practices for essential drugs.
The program would also incentivize drug manufacturers to meet “ambitious, proactive standards in securing a sustainable, high quality supply of essential medicines,” according to the committee’s press release on the new bill.
Drug shortages in the United States have reached an all-time high, with 323 medicines in short supply in the first quarter of 2024, according to the American Society of Health-System Pharmacists.
The supply of generic drugs has been a perennial problem that healthcare economists suggest was worsened by the COVID-19 pandemic supply chain disruptions.
Essential medicines, including antibiotics, cancer drugs, and ADHD medication, as well as pharmaceutical-grade supplies, such as saline, are some of the most vulnerable medical products on the market.
Beginning in 2027, the new entirely voluntary program would provide quarterly lump-sum incentive payments to healthcare providers and drug manufacturers for meeting sustainable purchasing and producing requirements set by the program’s administrators. The incentive payments would be calculated as a percentage of a price benchmark dependent on purchase volume.
“Prescription drug shortages are fueling high prices and limiting access to life-saving treatments and cures,” ranking member Mike Crapo (R-ID) said, adding that the bill would “take meaningful strides toward mitigating and preventing prescription drug shortages, ensuring that patients can receive the care they need, when they need it.”
The measure also would require healthcare providers to establish contingency contracts with alternative manufacturers of generic pharmaceuticals and prohibit drug manufacturers from forcing exclusive contracting requirements on healthcare providers, both of which promote competition.
The law specifically takes aim at group purchasing organizations, which act as intermediary groups to negotiate supply contracts among healthcare providers, medical device companies, and drug manufacturers.
Both parties in Congress and the Biden administration have scrutinized the role of pharmaceutical industry middlemen in the supply chain in attempts to address the drug shortage crisis.
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“Once again, monopolistic middlemen have put market power and profit over families’ health care,” Wyden said. “Middlemen like GPOs should not be able to do business with Medicare if their contracting practices are actively worsening the drug shortage challenge in America.”
In March, the Federal Trade Commission and the Department of Health and Human Services announced a joint action to investigate the practices of GPOs in perpetuating generic drug shortages through ineffectual contract negotiations.