Generic medicines are the backbone of the U.S. prescription drug market, supplying more than 9 out of every 10 prescriptions. And the production of generic medicines overall has been remarkably stable – even during challenges such as the COVID-19 pandemic.
Nonetheless, drug shortages, which hit crisis proportions between 2010 and 2011, can be a challenge for manufacturers, providers, and patients. Due to aggressive efforts by industry and the Food and Drug Administration (FDA), the incidence of shortages has declined, but recent reports suggest a rise in shortages in 2023.
As AAM’s latest white paper explains, drug shortages are not limited to generic markets. They affect roughly 3% of brand-only markets and 4-6% of generic/brand and generic-only markets. Nonetheless, evidence suggests that some generic drugs may be particularly susceptible to drug shortages due to unique challenges facing the generic industry. Manufacturing generic drugs is highly competitive and frequently low margin. Indeed, there are external issues including disruptions in the supply chain, regulatory delays, or changes in competitive intensity that make producing certain generics financially unsustainable.
In fact, the risk of drug shortages compounds as the long-term sustainability of generic manufacturing faces threats. Prices for generic drugs are decreasing, purchasers are becoming more concentrated, new generics are not adopted by payers as historically predicted, some generics never launch due to limited commercial opportunities, and registered manufacturing sites are declining. The combination of these factors forces generic manufacturers to reconsider production of lower-margin, often older, medicines to ensure continued financial sustainability of the overall pipeline. Generic product discontinuations have risen to over 3,000 since 2010 and appear to be on the rise. At their core, drug shortages reflect challenges to the long-term sustainability of generic medicines. While each drug shortage is unique, most stem from the increasing fragility of the generic drug market. This instability often is caused by market and pricing factors that undermine the sustainability of generic manufacturing and government policies that compound challenging market dynamics due to unpredictable reimbursement or administrative burdens. Regulatory and manufacturing challenges place additional burdens on generic manufacturers such as delaying the supply of materials to manufacture.
The result is a strain on supply chains and providers left without sufficient supply for patients. As FDA Commissioner Dr. Robert Califf recently noted,
We have got to fix the core economics if we’re going to get this situation fixed.
Share Your Voice
To help raise awareness of the essentialness of generic medicines to patients and our healthcare system, join our industry's 4GRxANTED campaign. The #4GRxANTED campaign asks people to record a video or share a story explaining who or what in their lives they take for granted but shouldn’t and post it on social media. For every video created, liked or shared with the hashtag #4GRxANTED, the generics industry will donate medicines to Direct Relief, a humanitarian aid organization that provides medical assistance to people affected by poverty or emergencies.
By Monét Stanford, Director, Policy
Published on June 29, 2023