FTC targets middlemen in generic drug shortages probe

The Federal Trade Commission (FTC) is asking for information from wholesalers and other middlemen in the pharmaceutical supply chain in an investigation into worsening shortages of generic medicines.

The probe, which will also focus on group purchasing organisations (GPOs), comes as shortages of life-saving drugs, including cancer therapies and antibiotics, are at a decade-long high, and increasing numbers of patients are facing the prospect of not being able to get treatment after a diagnosis.

It wants to explore how they may affect the pricing and availability of generics in the hope of discovering “the root causes and potential solutions” to the problem.

It’s the second major investigation into middlemen in the US medicines supply chain, coming after an ongoing FTC probe of pharmacy benefit management (PBM) companies, which started in 2022.

According to figures from the American Society of Hospital Pharmacists (ASHP), more than 300 medicines were in short supply at the end of 2023, affecting mainly chemotherapies, antimicrobials, central nervous system therapies, fluids and electrolytes, and hormonal agents.

A recent poll carried out by the organisation found that more than half of hospital pharmacists in the US were experiencing “major challenges” getting access to cancer therapies.

The issue of shortages has been blamed in part on disincentives to the manufacture of very low-priced generics, which can sometimes generate just pennies per dose for the companies that make them.

As a result, some companies choose to exit the market altogether, it is suggested, reducing the pool of manufacturers and making supplies vulnerable if a plant experiences quality control or other issues and has to stop production.

The thrust of the FTC’s investigation, which is being supported by the Department of Health and Human Services (HHS), is whether the middlemen have used their position to force the prices of generics down so low that suppliers have been forced to stop production.

“For years, Americans have faced acute shortages of critical drugs, from chemotherapy to antibiotics, endangering patients,” said the FTC's Chair, Lina Khan. “Our inquiry requests information on the factors driving these shortages and scrutinises the practices of opaque drug middlemen.”

The three largest wholesalers in the US are Cardinal Health, Cencora, and McKesson, claiming around 90% of the market, while there are an estimated 600 GPOs in the US. Prominent among these are Vizient, Premier Inc, and HPG, according to figures from Definitive Healthcare, which says nearly all (97%) of US hospitals have an affiliated GPO.

The questioning in the request for information is focused on a range of factors, including the extent to which the lack of competition among GPOs and wholesalers is affecting the dynamics of the generics market and the impact of their negotiation, contracting, and compensation practices.

The investigation has been applauded by the Association for Accessible Medicines (AAM), a trade organisation that represents manufacturers of generic and biosimilar drugs.

In a statement, its interim president and chief executive, David Gaugh, said: “Generic prices are decreasing, drug purchasers are becoming more concentrated, new generics are not adopted as quickly, some generics are never launched due to limited commercial opportunities, and registered manufacturing sites are declining.”

As a result of all of this, he continued, the risk of drug shortages “will only increase without action to bolster the long-term sustainability of generic manufacturing.”

In 2022, a Senate-commissioned report recommended that domestic US production of generics – which are often made in India and China – be stepped up to boost the security of supply.