Letters to the Editor
Correcting Misperceptions Related to Chemotherapy Drug Shortages in the United States To the Editor: In his recent Perspectives article, “Chemotherapy Drug Shortages in the United States Revisited,”1 Kantarjian draws attention to the recurring shortages of generic chemotherapy drugs and considers potential causes and remedies. However, the evidence suggests that three of the explanations he proposes— black markets, US Food and Drug Administration (FDA) regulatory practices, and Medicare Part B reimbursement policy changes—are not to blame for the problem. The black market for drugs in shortage is a symptom, not a cause, of drug shortages. Black markets occur because manufacturers and conventional distributors lack product, whereas demand remains strong. Middlemen earn profits by buying drugs that are not being used (for example, in a region of the country with less demand or in a hospital pharmacy where services are not needed) and reselling them in areas where demand is robust. The black market helps alleviate the effect of shortages by moving drugs to their most valued uses, but it diverts the high prices generated by a shortage away from manufacturers (who could use the profits to invest in better infrastructure). The black market will disappear when shortages disappear— but shortages will not disappear just by controlling the black market. As the US Government Accountability Office has pointed out,2 a plurality of drug shortages occurs because of manufacturing disruptions and quality problems. These quality problems are often discovered by FDA inspectors or by internal quality control in anticipation of an FDA inspection. No one suggests that the quality problems are trivial or false, nor is there evidence that the FDA has increased the frequency of its inspections or changed its standards; rather, the evidence suggests that FDA inspectors have been more likely to find quality deficiencies in the course of their inspections. The problem is not that they are looking more—it is that they are finding more. What about Medicare Part B? Like Kantarjian,1 many writers have identified the 2003 changes in Medicare Part B reimbursement as the villain in the drug shortage crisis. It is true, as Kantarjian notes, that the change in Medicare Part B reimbursement, from 95% of the average wholesale price to 6% above the average sales price, reduced the profitability of oncology practice. But the shortage of oncology drugs can only reflect the price received by manufacturers—not the price reimbursed
to physicians. Kantarjian notes that before 2003, the price that manufacturers charged for chemotherapy drugs was unregulated. He suggests that the new formula made it difficult for manufacturers to adjust prices over time, leading to shortages. However, in fact, the change in the reimbursement formula has never regulated either the level of prices paid to manufacturers or the flexibility of those prices. Both remain entirely unregulated, just as they were before 2003. With colleagues, I recently completed a study examining how prices of Medicare Part B drugs have varied over time.3 In contrast to the often-repeated claim that regulations limit pricing flexibility within a 6-month period, we found that prices for nearly three fourths of all Medicare Part B drugs had increased by more than 6% from one calendar quarter to the next, at least once over the period from 2005 to 2013; on average, 15% of quarterly changes in drug prices exceeded the 6% threshold. The 6-month lag in the regulations refers to changes in Medicare Part B reimbursement rates; as we show, these do lag behind market prices. When market prices decrease, reimbursements exceed current market prices, and when market prices increase, reimbursements are below current market prices. Over the period from 2002 to 2013, market prices decreased much more frequently than they increased, mainly because so many drugs lost patent protection and shifted from brand name to generic production. Black markets, FDA behavior, and changes in Medicare Part B are not the culprits behind drug shortages. Other explanations—including the role of group purchasing organizations, as suggested by Kantarjian,1 and the rapid growth of the generic injectable market, as suggested by our previous research—may be more plausible causes of this serious problem.4 Sherry A. Glied Wagner School of Public Service, New York University, New York, NY Author’s Disclosures of Potential Conflicts of Interest Disclosures provided by the authors are available with this article at jop.ascopubs.org. Corresponding author: Sherry A. Glied, PhD, Wagner School of Public Service, New York University, 295 Lafayette St, 2nd Floor, New York, NY 10012; e-mail: [email protected].
DOI: 10.1200/JOP.2014.002683; published online ahead of print at jop.ascopubs.org on December 23, 2014.
References 1. Kantarjian H: Chemotherapy drug shortages in the United States revisited. J Oncol Pract 10:329-331, 2014 2. US Government Accountability Office: Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability. Pub. No. GAO-14194, 2014
Copyright © 2014 by American Society of Clinical Oncology
3. US Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation: Medicare Part B Reimbursement of Prescription Drugs, 2014 4. US Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation: Economic Analysis of the Causes of Drug Shortages, 2011
M A R C H 2015
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jop.ascopubs.org
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Copyright of Journal of Oncology Practice is the property of American Society of Clinical Oncology and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
Correcting Misperceptions Related to Chemotherapy Drug Shortages in the United States To the Editor: In his recent Perspectives article, “Chemotherapy Drug Shortages in the United States Revisited,”1 Kantarjian draws attention to the recurring shortages of generic chemotherapy drugs and considers potential causes and remedies. However, the evidence suggests that three of the explanations he proposes— black markets, US Food and Drug Administration (FDA) regulatory practices, and Medicare Part B reimbursement policy changes—are not to blame for the problem. The black market for drugs in shortage is a symptom, not a cause, of drug shortages. Black markets occur because manufacturers and conventional distributors lack product, whereas demand remains strong. Middlemen earn profits by buying drugs that are not being used (for example, in a region of the country with less demand or in a hospital pharmacy where services are not needed) and reselling them in areas where demand is robust. The black market helps alleviate the effect of shortages by moving drugs to their most valued uses, but it diverts the high prices generated by a shortage away from manufacturers (who could use the profits to invest in better infrastructure). The black market will disappear when shortages disappear— but shortages will not disappear just by controlling the black market. As the US Government Accountability Office has pointed out,2 a plurality of drug shortages occurs because of manufacturing disruptions and quality problems. These quality problems are often discovered by FDA inspectors or by internal quality control in anticipation of an FDA inspection. No one suggests that the quality problems are trivial or false, nor is there evidence that the FDA has increased the frequency of its inspections or changed its standards; rather, the evidence suggests that FDA inspectors have been more likely to find quality deficiencies in the course of their inspections. The problem is not that they are looking more—it is that they are finding more. What about Medicare Part B? Like Kantarjian,1 many writers have identified the 2003 changes in Medicare Part B reimbursement as the villain in the drug shortage crisis. It is true, as Kantarjian notes, that the change in Medicare Part B reimbursement, from 95% of the average wholesale price to 6% above the average sales price, reduced the profitability of oncology practice. But the shortage of oncology drugs can only reflect the price received by manufacturers—not the price reimbursed
to physicians. Kantarjian notes that before 2003, the price that manufacturers charged for chemotherapy drugs was unregulated. He suggests that the new formula made it difficult for manufacturers to adjust prices over time, leading to shortages. However, in fact, the change in the reimbursement formula has never regulated either the level of prices paid to manufacturers or the flexibility of those prices. Both remain entirely unregulated, just as they were before 2003. With colleagues, I recently completed a study examining how prices of Medicare Part B drugs have varied over time.3 In contrast to the often-repeated claim that regulations limit pricing flexibility within a 6-month period, we found that prices for nearly three fourths of all Medicare Part B drugs had increased by more than 6% from one calendar quarter to the next, at least once over the period from 2005 to 2013; on average, 15% of quarterly changes in drug prices exceeded the 6% threshold. The 6-month lag in the regulations refers to changes in Medicare Part B reimbursement rates; as we show, these do lag behind market prices. When market prices decrease, reimbursements exceed current market prices, and when market prices increase, reimbursements are below current market prices. Over the period from 2002 to 2013, market prices decreased much more frequently than they increased, mainly because so many drugs lost patent protection and shifted from brand name to generic production. Black markets, FDA behavior, and changes in Medicare Part B are not the culprits behind drug shortages. Other explanations—including the role of group purchasing organizations, as suggested by Kantarjian,1 and the rapid growth of the generic injectable market, as suggested by our previous research—may be more plausible causes of this serious problem.4 Sherry A. Glied Wagner School of Public Service, New York University, New York, NY Author’s Disclosures of Potential Conflicts of Interest Disclosures provided by the authors are available with this article at jop.ascopubs.org. Corresponding author: Sherry A. Glied, PhD, Wagner School of Public Service, New York University, 295 Lafayette St, 2nd Floor, New York, NY 10012; e-mail: [email protected].
DOI: 10.1200/JOP.2014.002683; published online ahead of print at jop.ascopubs.org on December 23, 2014.
References 1. Kantarjian H: Chemotherapy drug shortages in the United States revisited. J Oncol Pract 10:329-331, 2014 2. US Government Accountability Office: Drug Shortages: Public Health Threat Continues, Despite Efforts to Help Ensure Product Availability. Pub. No. GAO-14194, 2014
Copyright © 2014 by American Society of Clinical Oncology
3. US Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation: Medicare Part B Reimbursement of Prescription Drugs, 2014 4. US Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation: Economic Analysis of the Causes of Drug Shortages, 2011
M A R C H 2015
•
jop.ascopubs.org
165
Copyright of Journal of Oncology Practice is the property of American Society of Clinical Oncology and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
