The US Federal Trade Commission (FTC) and Department of Health and Human Services (HHS) have issued a request for information on the practices of “opaque middlemen” in the pharmaceutical supply chain, and their role in the ongoing generic shortages, in efforts to determine both the causes and possible solutions.
FTC chair Lina Khan said the inquiry would focus on how group purchasing organisations (GPOs) and drug wholesalers may be contributing to “chronic shortages of generic medications used to treat everything from asthma to fevers to cancer”, reports Medpage Today.
For very sick patients, the persistent and acute availability problems can mean the difference between life and death, she said, citing, for example, the shortage of 15 different cancer drugs last year because of manufacturing and supply chain problems.
The FTC said the agencies are seeking public comment to “understand how both GPOs and wholesalers impact the overall generic pharmaceutical market, including how both entities may influence the pricing and availability of pharmaceutical drugs”.
GPOs are intermediaries between healthcare providers – hospitals, physicians, nursing homes, and home health agencies – and manufacturers and distributors. Their job is to negotiate deals for generic drugs and medical supplies between the two groups. Drug wholesalers, also middlemen, buy drugs straight from manufacturers and deliver them to providers.
Nuts and bolts
The request emphasised the agencies’ interest in learning more about the market concentration and contracting practices of GPOs and drug wholesalers, particularly in the following areas:
• Whether and to what extent market concentration among GPOs and drug wholesalers has affected smaller healthcare providers and rural hospitals;
• Whether and to what extent concentration among GPOs and drug wholesalers has disincentivised suppliers from competing in generic drug markets;
• The impact of the prevailing GPO compensation model, which may rely on rebates, chargebacks, and administrative fees from manufacturers and suppliers in exchange for favourable treatment, on generic manufacturers and other suppliers.
The agencies are also probing “whether and to what extent” GPOs and wholesalers adhere to certain anti-trust law focused on arrangements that may lead to decreased competition, and legislation that seeks to prevent wholesale distributors from leveraging “preferable volume pricing to franchises over small businesses”.
The agencies also asked how GPOs could change their contracting practices in ways that would encourage manufacturers to keep “a steady and reliable supply of high-quality products, while allowing these products to be purchased by healthcare providers at an affordable price”.
Other actions
Meanwhile, the FTC is continuing its scrutiny of other pharmacy middlemen: pharmacy benefit managers (PBMs).
PBMs are intermediaries between drug companies and insurers. While, in theory, their role is to negotiate with insurers to help keep medication costs down, because they negotiate a discount or “rebate” based on a drug’s list price, and because they keep a portion of that benefit, they have a perverse incentive to favour higher-cost drugs.
The FTC is also advancing efforts in other key areas, and has blocked more than half a dozen healthcare mergers in the past two years alone.
And for the first time ever, the agency sued a medical group and the private equity firm behind it.
Medpage Today article – US probes role of supply chain middlemen in generic shortages (Open access)
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Drug shortage fears as supply chain challenges persist
US cancer drug shortages lead to rationed treatment
UK drug shortages putting patient safety at risk