16 December 2011

Why policy matters

You may have read that the U.S. is mired in a shortage of many common generic drugs. Many important chemotherapy drugs are in such short supply that patients cannot complete their cancer treatments, or are being switched to less appropriate or more expensive treatments. Some drug trials have been suspended because the control group is not able to receive the standard of care.

The severity of the shortage is startling. It also deserves some introspection. Our government spends a tremendous amount on researching new drugs (the NIH estimates that it alone spends $31.2 billion annually on medical research). Why aren't we devoting more of our efforts to manufacturing and delivering those inexpensive drugs that we already know to be effective?

Better policies could have prevented such a shortage. Part of the problem seems to be that Medicare is required to pay such low prices for generic drugs that there is little profit margin for manufacturers, and thus, little incentive to invest in maintaining factories and in keeping up production. If Congress were to nudge the reimbursement rate for generic drugs slightly upwards, Medicare would probably save money overall by avoiding expensive shortages. There also may be something more insidious going on, in which manufacturers and middlemen find it profitable to limit supply and thus drive up prices (much like Enron did with California's electrical supply in 2000 and 2001). The government could also develop stronger penalties if drug manufacturers fail to fulfill their contracts to supply drugs to federal health entities (such as the VA and the Indian Health Service).

Medicine does not occur in a vacuum, and this shortage should be another wake-up call that it behooves doctors and patients to understand more broadly what impacts our nation's health and medical care. After all, any of us may become the patients so desperately needing these drugs.