Hospitals Spend $600M on Drug Shortages

New white paper looks at supply chain woes, potential policy proposals

April 05, 2024

The pandemic amplified longstanding supply chain challenges for critical sterile injectables, affecting critical patient care and costing millions for the nation’s hospitals.

A new report released this week from the U.S Department of Health and Human Services (HHS) focuses on policy considerations to prevent drug shortages and mitigate supply chain vulnerabilities. The report notes that about a quarter of the drugs in short supply were first reported prior to 2020, with the oldest dating back to 2012.

“According to estimates, hospitals can spend at least $600 million per year managing shortages and diverting essential personnel who are needed for direct patient care to find alternative treatments for patients,” the report notes.

Here’s what you need to know:

• Top concerns:  As of January 2024, there were 123 drugs in short supply. The products with the most shortages were analgesics/anesthetics (17%), anti-infective (12%), and cardiovascular (13%) products. These therapeutic areas accounted for 42 percent of all shortages.
• Key issues:  HHS identified several key problems that are driving shortages, including “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.”
• Supply chain strategies:  Diversifying the suppliers of key products—creating redundant manufacturing capacity and a balance of domestic and a mix of foreign sourcing—is critical to build resilience into the system.
• Possible policies:  The federal government is considering potential policy concepts focused on building resilience for both manufacturers and providers. These programs would link purchasing and payment decisions to supply chain practices and incentivize investments in resilience and diversification “at a scale that would drive impactful change in the market.”
• Quotable:  “Drug shortages impact patients, families, caregivers, pharmacists, hospitals, nursing homes, hospices, and other individuals and entities across the health care system,” the report notes. “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.”

The report is available to review online.