Drug shortages: GPOs are part of the solution

Critical prescription drug shortages continue to plague the nation and jeopardize patient access to many essential medicines. Between 2005 and 2011, the number of new shortages quadrupled to 251. Although that number declined to 117 in 2012, there are still more than 300 ongoing shortages to date.

Although drug shortages are a complex problem without an overnight fix, the Healthcare Supply Chain Association and its group purchasing organization members are committed to working with our supply chain partners to help mitigate this public health crisis.
In response to a 2011 order from President Obama, the U.S. Food and Drug Administration recently released its strategic plan for preventing drug shortages. The plan includes a proposed rule to require drug and biotechnology companies to promptly notify the agency of potential disruptions to the supply of medically important drugs. The FDA noted that most drug shortages are the result of manufacturing and quality control problems.

The FDA proposes working with drug makers to fix manufacturing problems. The agency encourages payers to explore financial or economic incentives to reward high-quality manufacturing. Importantly, the FDA did not explicitly mention a scorecard or seal of approval to rate manufacturing metrics, an idea that surfaced earlier this year after the FDA publicly suggested that the marketplace does not reward quality manufacturing.

GPOs respond
GPOs are currently working with hospitals, manufacturers, distributors, the Department of Health and Human Services and the FDA to ensure that hospitals and patients have access to the life-saving drugs they need. GPOs are already taking a variety of steps to reduce the impact of generic drug shortages, including:

  • Voluntary contracting. All GPO purchasing contracts are voluntary, meaning that hospitals are free to purchase “off contract,” that is, outside the GPO arrangement – and they frequently do.
  • Price adjustments. GPO contracts are the product of competitive market negotiations. Contract pricing is a constantly moving target, and drug companies regularly adjust pricing of GPO contracts based on market conditions, such as manufacturing capacity, raw material availability, and competitive suppliers. That means that when manufacturers experience shocks to production, such as a higher input price, they have the ability to quickly change the contracts. GPOs manage thousands of price changes annually.
  • Migration to alternative products. In addition to delivering cost savings, GPOs are the sourcing partners to hospitals. They work with hospitals and healthcare providers to ensure prompt and safe migration to alternative products when shortages arise.
  • Data-tracking. GPOs track data on drug shortages, strategize with members when there is the potential for supply chain disruption, and communicate with manufacturers and distributors to help foresee future problems.
  • Manufacturer evaluation. GPOs help members lessen their exposure to drug shortages by evaluating manufacturer reliability when sourcing and awarding contracts, and in helping providers establish best-practice purchasing procedures.
  • Increased suppler-provider communication. GPOs work with their supplier partners to communicate product demand from our provider members. By communicating this information to manufacturers in a timely fashion, they help manufacturers plan for production capacity.

The FDA and industry have identified numerous causes of drug shortages, including manufacturer problems, quality issues and barriers to getting new suppliers on line when supply is disrupted. GPOs are committed to being part of the solution.

Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org.

Curtis Rooney About Curtis Rooney

Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org

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