Response to Oncologic Drug Shortages Falls on Key Payers

Targeted Therapies in OncologyJune 2023
Volume 12
Issue 8
Pages: 62

Although drug shortages are not new, the number of drugs involved is increasing and resolutions seem to take longer, and oncology care is often affected by these shortages.

The high cost of new drugs has been a recent concern but in March 2023 there were several government reports regarding shortages of critical generic drugs, with the US Department of Homeland Security declaring it a national security risk.1,2 Although drug shortages are not new, the number of drugs involved is increasing and resolutions seem to take longer.3 Oncology care is often affected by these shortages, and several drugs involved, including cisplatin and 5-fluorouracil, are critical to many curative regimens. The questions are how did we get here and how can this problem be resolved?

In 2019, the FDA published a root cause analysis summarizing 3 primary causes: a lack of financial incentives for producing unprofitable drugs; no recognition or reward for manufacturers who have quality management systems; and logistic and regulator challenges preventing manufacturers to rapidly respond to acute shortages.4 Solutions were recommended but a significant cause was not discussed—the current price control on drugs.

Prior to the passing of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003, branded drugs were reimbursed by Medicare at 95% of average wholesale price (AWP), plus an add-on fee to cover other costs.

For drugs with brand and generic manufacturers, AWP was either the median from generic sources or from the brand, whichever was smaller. However, there was not transparency about how AWP was calculated; an analysis suggested the true cost of many generic drugs was far lower than the AWP.

MMA mandated that Medicare reimburse all Part B drugs at the average sales price (ASP) over the past 6 months plus a 6% markup (currently at 4.3% due to sequestration). The ASP of a weekly dose of cisplatin at 70 mg is $11.81.5

Currently, it is difficult for a manufacturer to pass increases in raw material or other costs to consumers because of fierce competition and the desire by purchasers not to lose money. As the price falls, it becomes difficult for less efficient manufacturers to continue making the product. Often, they will dump the remaining product, which is rapidly purchased, putting further downward pressure on the ASP. If there is a supply chain issue, such as with dacarbazine in 2021, a life-threatening shortage occurs.

Economists state that if you want a shortage on something, put a price control on it. Due to the rigidity of the ASP calculation, generic drugs are price controlled by the US government, which does not allow increases in costs to be easily passed on, so that manufacturers remain profitable or others are encouraged to rapidly build up manufacturing during a shortage.

There are options that would help alleviate this problem. One would be to put a price floor on critical drugs. This may lead to a surplus of some commonly used drugs and shortages of other, lesser-used drugs. Another would be a much larger add-on fee for generic drugs to minimize the effect of price increases on practice economics.

Either way, to decrease the problem of shortages will require investment by payers, especially the Centers for Medicare & Medicaid Services. Unfortunately, many in our government continue to broadly paint all pharmaceutical companies as the bad guys while our patients suffer the consequences.

Leslie Busby, MD, is chair of the US Oncology Pharmacy & Therapeutics Committee, and a medical oncologist and hematologist at Rocky Mountain Cancer Centers, Boulder, Colorado.

1. “People will die from this”: 4 cancer drugs are in short supply. Advisory Board. March 21, 2023. Accessed May 5, 2023.
2. Milano V. Drug shortages in the United States. Homeland Security Digital Library. March 27, 2023. Accessed May 1, 2023.
3. Drug shortages statistics. American Society of Health-System Pharmacists. Accessed May 1, 2023. https://
4. US Food and Drug Administration. Drug shortages: root causes and potential solutions 2019. Updated February 21, 2020. Accessed May 1, 2023.
5. 2023 ASP drug pricing files. Centers for Medicare & Medicaid Services. Updated March 30, 2023. Accessed May 1, 2023.
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