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S. HRG. 112–885 

PRESCRIPTION DRUG SHORTAGES: EXAMINING A 

PUBLIC HEALTH CONCERN AND POTENTIAL 

SOLUTIONS 

HEARING 

OF THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON

EXAMINING THE PRESCRIPTION DRUG SHORTAGES, FOCUSING ON EXAMINING A PUBLIC HEALTH CONCERN AND POTENTIAL SOLUTIONS, 

AND IF THE FOOD AND DRUG ADMINISTRATION’S ABILITY TO RESPOND SHOULD BE STRENGTHENED 

DECEMBER 15, 2011 

Printed for the use of the Committee on Health, Education, Labor, and Pensions 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys/ 
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

TOM HARKIN, Iowa, Chairman 

BARBARA A. MIKULSKI, Maryland 

JEFF BINGAMAN, New Mexico 

PATTY MURRAY, Washington 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

KAY R. HAGAN, North Carolina 

JEFF MERKLEY, Oregon 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL B. ENZI, Wyoming 

LAMAR ALEXANDER, Tennessee 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

ORRIN G. HATCH, Utah 

JOHN MCCAIN, Arizona 

PAT ROBERTS, Kansas 

LISA MURKOWSKI, Alaska 

MARK KIRK, Illinois 

DANIEL SMITH, Staff Director 

PAMELA SMITH, Deputy Staff Director 

FRANK MACCHIAROLA, Republican Staff Director and Chief Counsel 

(II) 
C O N T E N T S 

STATEMENTS 

THURSDAY, DECEMBER 15, 2011 

Page 

COMMITTEE MEMBERS

Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and 

Pensions, opening statement ............................................................................... 1 

Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, opening 

statement .............................................................................................................. 2 

Kirk, Hon. Mark, a U.S. Senator from the State of Illinois ................................. 8 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 9 

Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon ............................. 9 

Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia ....................... 10 

Bennet, Hon. Michael F., a U.S. Senator from the State of Colorado ................. 10 

Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico .................. 11 

Blumenthal, Hon. Richard, a U.S. Senator from the State of Connecticut ........ 11 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 12 

Casey, Hon. Robert P., Jr., a U.S. Senator from the State of Pennsylvania ...... 40 

Prepared statement .......................................................................................... 41 

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 43 

Hagan, Hon. Kay R., a U.S. Senator from the State of North Carolina ............. 45 

Mikulski, Hon. Barbara A., a U.S. Senator from the State of Maryland ............ 47 

Prepared statement .......................................................................................... 47 

GUEST SENATE MEMBER

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota ................... 3 

Prepared statement .......................................................................................... 5 

WITNESSES—PANEL I 

Glied, Sherry, Ph.D., Assistant Secretary For Planning and Evaluation, Department of Health and Human Services, Washington, DC ............................ 13 

Prepared statement .......................................................................................... 14 

Kweder, Sandra, M.D., Deputy Director, Office of New Drugs, FDA, Washington, DC ............................................................................................................. 18 

Prepared statement .......................................................................................... 21 

WITNESSES—PANEL II 

Crosse, Marcia G., Ph.D., Director, Health Care, Government Accountability 

Office, Washington, DC ....................................................................................... 49 

Prepared statement .......................................................................................... 51 

Aitken, Murray, Senior Vice President, Healthcare Insight, IMS, Parsippany, 

NJ .......................................................................................................................... 56 

Prepared statement .......................................................................................... 57 

Neas, Ralph G., J.D., Chief Executive Officer, Generic Pharmaceutical Association, Washington, DC ...................................................................................... 66 

Prepared statement .......................................................................................... 67 

Maris, John M., M.D., Chief, Division of Oncology, Children’s Hospital of 

Philadelphia, PA .................................................................................................. 72 

Prepared statement .......................................................................................... 74 

(III) 
(IV) 

ADDITIONAL MATERIAL 

Statements, articles, publications, letters, etc.: 

Jerry A. Cohen, M.D., President, American Society of Anesthesiologists; 

and Arnold J. Berry, M.D., M.P.H., Vice President for Scientific Affairs, 

American Society of Anesthesiologists, Washington, DC .......................... 85 

Response by the Department of Health & Human Services, Food and 

Drug Administration to questions of: 

Senator Casey ............................................................................................ 87 

Senator Blumenthal .................................................................................. 90 

Senator Enzi .............................................................................................. 91 

Senator Burr .............................................................................................. 93 

Senator Hatch ............................................................................................ 93 
(1) 

PRESCRIPTION DRUG SHORTAGES: EXAMINING A PUBLIC HEALTH CONCERN AND 

POTENTIAL SOLUTIONS 

THURSDAY, DECEMBER 15, 2011 

U.S. SENATE, 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:05 a.m. in Room 

106, Dirksen Senate Office Building, Hon. Tom Harkin, chairman 

of the committee, presiding. 

Present: Senators Harkin, Mikulski, Bingaman, Casey, Hagan, 

Merkley, Franken, Bennet, Whitehouse, Blumenthal, Enzi, Isakson, 

Hatch, and Kirk. 

Also Present: Senator Klobuchar. 

OPENING STATEMENT OF SENATOR HARKIN

The CHAIRMAN. Good morning. The Senate Committee on Health, 

Education, Labor, and Pensions will come to order. 

Today’s hearing focuses on a serious public health issue in the 

United States. That’s the growing problem of prescription drug 

shortages. For the past several years, hospitals across the country 

have experienced an increasing number of shortages of life-sustaining prescription drugs. Today we’re going to examine the cause 

of the shortages and explore potential solutions. 

The harsh reality is, the problem is getting dramatically worse. 

The number of prescription drug shortages in the United States 

has tripled over the past 5 years. Over 80 percent of these shortages involve generic sterile injectables, including critical products 

used for chemotherapy, emergency medicine, anesthesia, and intravenous feeds. Many of these products are absolutely essential for 

the treatment of serious diseases, and shortages in anesthetic products are adversely affecting even the most routine surgeries. 

As hospitals encounter difficulties in securing an adequate supply of critical drugs, it forces doctors to ration their supply of medication, delay medical procedures, and use alternative products that 

may have unwanted side effects. In some instances, drug shortages 

also compel medical practitioners to rely on foreign versions of 

drugs that have not been reviewed by the FDA and not approved 

for use in the United States. 

For patients, drug shortages can literally be a matter of life or 

death. To cite one example, Al Wegner of Ionia, IA wrote to inform 

me that a drug he received to treat his colon and prostate cancer 

is now in shortage and will run out by the end of the year. 
2 

In May, Senator Enzi and I convened a bipartisan working group 

to evaluate the issue of shortages and identify potential legislative 

solutions. Between the work of that group and our discussions 

today, I’m hopeful that we can agree on meaningful bipartisan solutions to address this complex problem. 

In May, along with Senators Casey and Blumenthal, I wrote to 

the Government Accountability Office to request a report on the 

drug shortage problem and potential solutions. GAO issued its report this morning. Marcia Crosse, Director of GAO’s health care 

team, is here to discuss that, including its recommendations. 

I also look forward to hearing from our other witnesses who 

bring to this discussion a wide range of experiences and perspectives, and I thank you all for being here. 

I also want to acknowledge and thank our distinguished Ranking 

Member, who has been a key leader here in the Senate in addressing this issue. 

I will yield to Senator Enzi for an opening statement. 

OPENING STATEMENT OF SENATOR ENZI

Senator ENZI. Thank you, Mr. Chairman. Thanks for having this 

hearing. 

As a result of recent drug shortages, patients all over the United 

States are forced to delay their treatment or use second-best alternatives. Clinical trials that use these drugs are being stalled, preventing possible new treatments from coming to market. The pharmaceuticals in shortage are complex to manufacture and treat a variety of conditions in different settings. They have always been vulnerable to shortage. However, these shortages are now more widespread. 

Currently, FDA lists over 200 products in short supply. These 

shortages result in increased costs for patients, the Government 

providers, researchers, and worse outcomes for patients. Generic 

drugs make up the majority of drugs in shortage, and many are inexpensive. While we must move as quickly as possible to get these 

life-saving drugs to the patients that need them, it’s important that 

we understand the causes that lead to this tragic problem. 

There are conflicting opinions on how economics, regulation, and 

supply-chain management contribute to the shortages we see 

today. I understand this is a complex, multifaceted issue, and I 

look forward to hearing from all our witnesses today to help clarify 

the root causes and describe possible next steps. 

Only once we understand the causes should we craft a solution. 

There are many alternative policy options being discussed. My colleague, Senator Klobuchar, and Senator Hatch have been leaders 

in this area, but their proposals address very different problems. 

We must keep in mind possible unintended consequences as we 

move forward. 

My staff has been participating on a bipartisan working group 

for months, meeting with the stakeholders, investigating the 

causes, and developing solutions. I look forward to seeing the 

group’s proposal in the next few months. I understand that the generic pharmaceutical industry is also working to come up with a 

solution to address supply interruptions as well, and I look forward 

to hearing more about that today. 
3 

There is bipartisan desire to implement a solution that will not 

only mitigate shortages in the short-term but address underlying 

causes so we don’t find ourselves in this tragic situation again. I 

look forward to working with my colleagues on and off the committee to do this as quickly as possible without compromising the 

quality of the policy. 

I’m concerned, however, that the FDA could be doing more to address these shortages now. The Government Accountability Organization says their management remains a barrier, and new recordkeeping methods would not improve communication within the 

agency. Further, GAO says there has not been a systematic review 

of all applications currently waiting for approval to see if they are 

relevant to the shortages. 

As a first step, FDA should expedite the review of any application for drugs in shortage. I find it troubling that we do not know 

how many applications relevant to shortages are waiting for FDA 

review and look forward to exploring any barriers that are currently preventing the agency from identifying and expediting these 

applications. 

That being said, I want to commend the work of the Drug Shortages Office of the Food and Drug Administration. Until recently, 

this office only had four members. Yet, when provided information 

about shortages, they have been able to assist in communication 

and finding solutions with the manufacturers in some cases. I only 

hope that this sort of collaboration among offices in FDA and industry will continue after the public health emergency is resolved. 

Looking back a few years, multiple companies shut down capacity at the same time. Increased coordination may have helped to 

prevent some of the situations we find ourselves in today. 

Thank you for convening this important hearing, and I look forward to discussing what steps we can take to solve this tragic problem. 

The CHAIRMAN. Thank you very much, Senator Enzi. 

We’d like to start off by welcoming our esteemed colleague, Senator Klobuchar from Minnesota. She’s been a leader in this effort 

and has introduced an important bill on this issue with Senator 

Casey. It’s called the Preserving Access to Life-Saving Medications 

Act. 

Senator Klobuchar, we’re pleased to have you here this morning. 

Your statement, of course, will be made a part of the record in its 

entirety, and please proceed as you so desire. 

STATEMENT OF SENATOR KLOBUCHAR

Senator KLOBUCHAR. Thank you very much, Chairman Harkin, 

Ranking Member Enzi, Senator Kirk. Thank you very much for 

starting the working group and being devoted to doing something 

about this issue. It’s something that experts are seeing as an unprecedented shortage in drugs, forcing some patients to delay their 

treatments, using unproven alternatives or, sadly in some cases, 

drug shortages have even resulted in patient deaths. 

Over a year ago I heard about this first. I think Senator Harkin, 

from the Midwest, understands our people are loud and call their 

officials when things go wrong, and I couldn’t believe the number 

of pharmacists, and also doctors and patient groups, that came to 
4 

our office seeking help. And as the year went on, I think more and 

more of my colleagues heard about this from people in their own 

States. 

Just a few months ago I met a young boy named Axel Zirbes. 

Alex Zirbes is a little 4-year-old boy with bright eyes and a big 

smile. He also happens to have no hair on his head, and that’s because he’s being treated for leukemia. When he was scheduled to 

start chemotherapy earlier this year, Axel’s parents learned that 

an essential drug, cytarabine, was in short supply and might not 

be available for their son. Obviously, this threw them into a panic. 

They started calling themselves all over the country. The pharmacists were trying, the doctors were trying, and they actually 

made plans to go to Canada so he could get his chemotherapy 

treatment. 

Well, at the last minute, the hospital was able to secure the 

medication from a pharmacy that still had a supply. But I think 

you all know, Axel and his parents are not alone, and not every 

story has turned out as good as that one. 

As you know, there were 178 drug shortages reported in 2010 

and already 231 reported as of this November. Look at that dramatic increase. When you go back 5 years, there were only 55 drug 

shortages. So the facts speak for themselves. 

For some of these drugs, no substitutes are available. Or, if they 

are, they’re less effective. A survey conducted by the American Hospital Association showed that nearly 100 percent of their hospitals 

experienced a shortage. 

It is clear that there are a large number of overlapping factors, 

as Senator Enzi discussed, that are resulting in unprecedented 

shortages. Experts cite a number of factors. Market consolidation 

and poor business incentives, manufacturing problems and production delays, unexpected increases in demand for a drug, inability 

to procure raw materials, and even the influence, the very unfortunate influence as of late, of a ‘‘gray market.’’ 

However, when drugs are made by only a few companies, a decision by one drug maker can have a large impact. 

Therefore, to help correct a poor market environment or to prevent ‘‘gray market’’ drugs from contaminating our medication supply chain, we must address the drug shortage problem at its root. 

As was mentioned, I introduced the Preserving Access to LifeSaving Medications Act with Senator Casey of Pennsylvania. Susan 

Collins joined us, and many others, and so the bill now has bipartisan support. The bill would require drug manufacturers to provide early notification to the FDA whenever there is a factor that 

may lead to a shortage. 

And I would agree with Senator Enzi that it’s very complicated 

to look at what these causes are and to figure out the long-term 

solutions. But I believe that the short-term solution has already 

been proven to work. When you look at the numbers with the FDA, 

in the last 2 years the FDA, with early notification and more information, has successfully prevented 137 drug shortages. 

So when we went to them to try to figure out what we can do 

to at least address this immediate problem, they said, ‘‘Look, what 

we’re doing works, but we don’t really necessarily have the tools 

and the authority to be able to do this across the board,’’ and that’s 
5 

why we came up with the idea of doing it beyond orphan drugs to 

doing it sooner so that they get the information sooner, because the 

sooner they get the information, the more they’re going to be able 

to respond and get something done. 

In addition to adding more sponsors and the good working group 

that you’ve set up since the time that we introduced this bill, two 

major things have happened. The administration, the President 

has endorsed this bill. The House has taken on a very similar bill, 

led by Representative DeGette. The President’s Executive order, I 

should note, took steps toward advancing the goals. But he made 

clear at the same time that Congress must still act in order to protect patients and ensure consumers have access to these life-saving 

medications. 

The second major change is that today the FDA is announcing 

a rule that would expand shortage notification for sole-source manufacturers. This is clearly a step in the right direction, but I would 

argue we still need to get this legislation done because we have the 

issue that we have manufacturers that are not sole-source that 

have also been involved in drug shortage situations. So there is 

good reason to continue to work to pass this legislation. 

And then it also has been noted by both the Chairman and the 

Ranking Member that we need to continue the work of the working 

group to look at the long-term solutions to this problem. 

I would just add when you look at the eyes of that little 4-yearold balding boy and you realize that his whole family was put in 

a panic, or you meet some of the patients that I’ve met, or the 

pharmacists who are already under-staffed and are dealing with 

very difficult times in health care, the last thing we want to do is 

to have hospitals, doctors, or pharmacists running around literally 

spending half a day trying to find one dose of a medication. This 

is no way to run a railroad. 

I really appreciate the committee’s willingness to look at this 

issue. I would urge you to move our legislation as soon as possible 

as a short-term solution, and then continue the long-term work 

that needs to be done to get at the underlying root causes of this 

problem. 

Thank you very much, Mr. Chairman, for allowing me to speak 

today. Thank you for all the Senators that have come today. We 

now have six of you here, so I know we can solve this problem, and 

I look forward to working with all of you. Thank you very much. 

[The prepared statement of Senator Klobuchar follows:] 

PREPARED STATEMENT OF SENATOR KLOBUCHAR

Chairman Harkin, Ranking Member Enzi, and my fellow colleagues on the HELP Committee—I am glad that this hearing is 

being held today to discuss causes and solutions to the drug shortage crisis. I appreciate the opportunity to join you all and briefly 

share my thoughts and experiences after having worked on this 

issue for the past year. 

The country is facing what experts are calling a ‘‘crisis’’ with ‘‘unprecedented’’ shortages for a record number of essential drugs. 

Drug shortages have impacted individuals all across the country— 

forcing some patients to delay their life-saving treatments or use 
6 

unproven, less-effective alternatives. In some cases, drug shortages 

have even resulted in patient deaths. 

Because of the urgency of this issue, this morning the FDA announced an Interim Final Rule that will require manufacturers to 

provide early notification to the FDA so the agency can work with 

manufacturers, hospitals, pharmacists, and patients to find ways to 

prevent drug shortages. 

Having this information will help FDA take steps necessary to 

find appropriate alternatives, aid manufacturers in correcting manufacturing problems, and help providers and patients maintain the 

care they need and deserve. 

The legislation that I introduced with Senator Casey, The Preserving Access to Life-Saving Medications Act, would require drug 

manufacturers to provide early notification to the FDA whenever 

there is a factor that may lead to a shortage. And it is helpful that 

the FDA followed our leadership and took the steps they did today 

to speed this process along. 

This is something I have been working on for over a year when 

I first heard from hospitals, pharmacists, and patients from Minnesota that they were facing shortages in essential medications— 

specifically to chemotherapy drugs. Their urgency caused me to 

send a letter to FDA Commissioner Hamburg urging the FDA to 

take actions to address this public health crisis. 

Over the next few months, I continued to receive calls from constituents asking for help in finding medications in short supply. I 

worked with manufacturers, stakeholders, and the FDA to try to 

find an appropriate solution to ensure that patients continued to 

receive the care they needed and deserved. 

Just a few months ago, I met a young boy named Axel Zirbes. 

Axel Zirbes is a cute 4-year-old boy from the Twin Cities with 

bright eyes and a big smile. He also happens to have no hair on 

his head. That’s because Axel is being treated for leukemia. 

When he was scheduled to start chemotherapy earlier this year, 

Axel’s parents learned that an essential drug, cytarabine (syeTARE-a-been), was in short supply and might not be available for 

their son. Understandably, they were thrown into a panic and desperately looked for any available alternatives. They even prepared 

to take Axel to Canada, where cytarabine (sye-TARE-a-been) was 

still readily available. 

Fortunately, it didn’t come to that. At the last minute, the hospital was able to secure the medication from a pharmacy that still 

had a supply. 

But Axel and his parents are not alone. 

As you know, there were 178 drug shortages reported in 2010 

and already 231 reported as of this November—a dramatic increase 

from 55 just 5 years ago. 

For some of these drugs, no substitutes are available. Or, if they 

are, they’re less effective and may involve greater risks of adverse 

side effects. The chance of medical errors also rises as providers are 

forced to use second- or third-tier drugs that they’re less familiar 

with. 

A survey conducted by the American Hospital Association 

showed that nearly 100 percent of their hospitals experienced a 

shortage. Another survey, conducted by Premier Health System, 
7 

showed that 89 percent of its hospitals and pharmacists experienced shortages that may have caused a medication safety issue or 

error in patient care. 

It is clear that there are a large number of overlapping factors 

that are resulting in unprecedented shortages. Experts cite a number of factors that are responsible for the shortages. These include 

market consolidation and poor business incentives, manufacturing 

problems and production delays, unexpected increases in demand 

for a drug, inability to procure raw materials, and even the influence of the ‘‘gray market’’. 

However, when drugs are made by only a few companies, a decision by any one drugmaker can have a large impact. 

Therefore, to help correct a poor market environment or to prevent ‘‘gray market’’ drugs from contaminating our medication supply chain, we must address the drug shortage problem at its root. 

As I mentioned, the bill I introduced with Senator Casey will require manufacturers to provide early notification to FDA. But it 

will also direct the FDA to provide up-to-date public notification of 

any actual shortage situation and the actions the agency would 

take to address them. 

Additionally, the bill requires the FDA to develop an evidencebased list of drugs vulnerable to shortages and to work with the 

manufacturers to come up with a continuity of operations plan to 

address potential problems and add redundancies to protect 

against potential shortages. 

The bill would also direct the FDA to establish an expedited reinspection process for manufacturers of a product in shortage. 

With manufacturers providing early notification, the FDA’s Drug 

Shortage Team can then appropriately use their tools to prevent 

shortages from happening. In the last 2 years, the FDA, with early 

notification and more information, has successfully prevented 137 

drug shortages. 

And while the Executive order the President issued in October 

took steps toward advancing these goals, he has made clear that 

Congress must act in order to protect patients and ensure consumers have access to the life-saving medications that they need 

and deserve. 

I understand that this may be a short-term solution to a longterm problem. That’s why I have been working with several of my 

colleagues on this committee to come up with a broad, permanent 

solution—one that includes methods to address the root causes of 

drug shortages. 

At the urging of this bipartisan working group, the FDA held a 

public workshop in September that brought together patient advocates, industry, consumer groups, health care professionals, and researchers to discuss the causes and impact of drug shortages and 

possible strategies for preventing or mitigating future shortages. 

In addition to the workshop, I have been speaking with a broad 

range of stakeholders to try to discover why we have seen such a 

large number of shortages over the past few years. 

I have also urged FDA to improve their communication with patients and providers. This will ensure that patients and doctors are 

not the last to know when there is a shortage. 
8 

This current explosion of shortages appears to be a consequence 

of a lack of supply of certain products to keep up with a substantial 

expansion in the scope and demand for those products. 

Due to the complex nature of these drug shortages, there is no 

single or simple solution that will solve all problems. A solution 

will require all stakeholders to play a role in mitigating future 

drug shortages. 

That includes increased and transparent coordination between 

the offices in the FDA responsible for drug shortages, compliance, 

and new drug applications. 

That includes better recordkeeping and communication between 

the drug manufacturers and the FDA. 

And it must include methods to ensure that we have the manufacturing capabilities to keep up with demand. One solution may 

be to provide tax credits to incentivize manufacturers to upgrade 

their production capabilities or to remain in or join the market. 

But one thing is clear: This is a national public health crisis that 

must be addressed. I will continue to work with my colleagues in 

the committee and in the Senate to try to develop a broad and permanent solution and urge my colleagues to support this legislation 

that will help ensure access of needed medications for our Nation’s 

patients. 

Thank you. 

The CHAIRMAN. Senator Klobuchar, thank you very much for 

your statement and your leadership on this issue. 

I know you have other committee business that you have to attend to, so thank you very much for being here, and we look forward to working with you as we try to resolve this issue. 

Senator KLOBUCHAR. Thank you. 

The CHAIRMAN. Thanks, Senator Klobuchar. 

I thought I would call the first panel up, and that would be Dr. 

Sherry Glied, Dr. Sandra Kweder, and that’s it, those two up for 

our first panel. 

Before I do that, we have usually a rule in this committee that 

we don’t have opening statements and stuff, but I know this is an 

issue that a lot of people have weighed in on and have great concerns about, and I thought I would allow Senators, if they would 

like, to make short comments on this before we turn to our panel. 

[Pause.] 

So, I would yield. The order of appearance is Senator Kirk, Senator Franken, Senator Merkley, Senator Isakson, and Senator Bennet. 

If you had a short comment, I’d be more than willing to entertain 

comments, Senator Kirk. 

STATEMENT OF SENATOR KIRK

Senator KIRK. Thank you. I very much appreciate this hearing. 

An ex-staffer of mine was just diagnosed with lymphoma type B. 

As everyone knows who fights that, you take a four-drug regimen 

called R-CHOP, and that includes doxorubicin, which is generic, 

only three suppliers, and in short supply. And so I’m very much 

looking forward to this hearing. I applaud Senator Klobuchar’s legislation. 
9 

We want to make sure that the very large FDA bureaucracy does 

not generate a decision, because of manufacturing regulations or 

others, that issues a completely unbalanced decision to shut down 

supply, so that the patient that I know so well does not have 

doxorubicin to fight lymphoma. 

And so I applaud you, and I think this is a very important hearing and hope to back legislation on this. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Kirk. Thanks for your leadership on this. 

Senator Franken, I want to thank you also for your leadership 

on this issue. You’ve been heavily involved in this, and I appreciate 

it. Any comments? 

STATEMENT OF SENATOR FRANKEN

Senator FRANKEN. Thank you, Mr. Chairman. I’m glad to have 

the opportunity to discuss this critical problem, and I want to 

thank my senior Senator, Senator Klobuchar, for her leadership on 

this. 

As you know, prescription drug shortages are affecting the care 

that patients in Minnesota and across the Nation receive, and in 

some cases it is truly a matter of life and death, as Senator Kirk 

so personally discussed. 

I recently talked to a doctor from Minnesota who told me that 

a chemotherapy that she uses with her patients is currently in 

shortage. For new patients, she’s going to have to recommend a 

treatment that may not be as effective, and for patients currently 

on the chemo, she’s going to have to switch them to a different 

treatment. She told me that when she has to change a patient from 

a chemo that is working to a new treatment, the new chemo has 

only a 1 in 3 chance of working the first time, 1 in 3. Imagine telling that to your patient. Imagine being the patient. 

As I’m sure we’ll hear from the expert witnesses, this issue is not 

simple. There is no one cause or one solution. I am proud to participate in a bipartisan working group of members of this committee 

that is looking at legislative proposals to address these critical 

shortages, and I am a co-sponsor of the legislation introduced by 

Senators Klobuchar and Casey that will require drug manufacturers to let the FDA know when they may discontinue a drug. This 

legislation is an important first step while we work toward ways 

to address this issue on a larger scale. 

Mr. Chairman, thank you again for holding this important hearing. I look forward to hearing the expert testimony today and to 

continue to work with you to preserve access to life-saving drugs 

in Minnesota and across our Nation. Thank you. 

The CHAIRMAN. Thank you, Senator Franken. 

Senator Merkley. 

STATEMENT OF SENATOR MERKLEY

Senator MERKLEY. Thank you, Mr. Chairman. Thank you for 

sponsoring this hearing. I applaud Senator Klobuchar and Senator 

Casey for helping highlight this issue, put a spotlight on it. It’s certainly of extreme concern in the health care system throughout the 

country. 
10 

In November I held a roundtable discussion at the Oregon 

Health and Sciences University to hear from Oregonians who have 

been directly impacted. I heard from a patient who was 6 months 

into his treatment for multiple myeloma when he was suddenly 

told that the drugs were no longer available. And at first it was 

you can’t come in this day of the week, come in 2 days later; and 

then it was they’re not available at all. And this is happening thousands of times a week across this Nation. 

Suddenly you have a patient in the middle of a drug regimen. 

The spouse is wondering what can I do to help acquire these medicines. Do I get on the Internet? Do I call hospitals throughout this 

country? The patient, who should be focusing all of their mental 

energy on healing, is suddenly extraordinarily stressed, the worst 

possible situation for actually healing and taking advantage of the 

regimen. 

It isn’t just that it’s stressful. It’s that it possibly destroys the effectiveness of the treatment regimen both because of the unavailability and because of the stress. 

And certainly doctors and pharmacists express that getting access to drugs that are in shortage takes up an extraordinary 

amount of their time and energy, which is hugely inefficient for the 

system. They also talked about how, over the last couple of years, 

the situation has gotten so much worse that there have been 

changes, and that’s what this hearing is about, understanding it 

better, because it’s absolutely counter-productive and unacceptable. 

I look forward to hearing from the experts and working with my 

colleagues on both sides of the aisle who expressed a lot of concern 

about this. Thank you. 

The CHAIRMAN. Thank you, Senator. 

Senator Isakson. 

STATEMENT OF SENATOR ISAKSON

Senator ISAKSON. I commend you on calling the hearing. This is 

a preeminent issue in my State of Georgia. 

The CHAIRMAN. Thank you, Senator Isakson. 

Senator Bennet. 

STATEMENT OF SENATOR BENNET

Senator BENNET. Thank you, Mr. Chairman and the Ranking 

Member. Thanks for holding this hearing. It’s actually been great 

to hear the comments from my colleagues up here because we are 

seeing exactly the same thing in Colorado. You know, the FDA has 

been notified about 220 drug shortages this year, and we know that 

the number of patients this affects is monumental. For cancer 

alone, over 550,000 patients are currently affected by our national 

drug shortage crisis. 

In Colorado, I can tell you that our patients and providers are 

extremely frustrated. A pharmacist at St. Mary’s Hospital in Grand 

Junction told us that he keeps a 2-page list of 50 drugs that he 

can’t get or barely can get hold of, including 12 chemotherapy 

drugs. Our own Colorado Cancer Research Program has held public 

forums in places like Denver and Colorado Springs with hundreds 
11 

in attendance, trying to mobilize advocates and find consensus 

around solutions. 

Like everyone else on this panel, I have gotten letters and calls 

from people suffering from cancer in my State saying what are you 

doing about these drug shortages? The last thing that people who 

are suffering from cancer should be doing is spending time having 

to call their Senators to say how do I get my drugs. 

Mr. Chairman, this is a vital issue, a critical problem in all of 

our States, and I think we need to come together in the HELP 

Committee in a bipartisan way and make sure we’re addressing it. 

We will continue to provide you and the Ranking Member with the 

work that’s being done in Colorado in the Drug Shortage Working 

Group with additional ideas for consideration. I look forward to the 

testimony today. 

Thank you, Mr. Chairman, for holding what I consider one of the 

most important hearings we’ve had since I’ve been here. 

The CHAIRMAN. Thank you, Senator Bennet. 

Senator Bingaman, any statements or any comments? 

STATEMENT OF SENATOR BINGAMAN

Senator BINGAMAN. Mr. Chairman, I will not have comments. I 

look forward to the hearing and congratulate you for calling the 

hearing. 

The CHAIRMAN. Thank you very much. 

Senator Blumenthal. 

STATEMENT OF SENATOR BLUMENTHAL

Senator BLUMENTHAL. I also look forward to the hearing and 

want to thank the Chairman for having it. It is a subject that certainly impacts Connecticut, where the workhorse medicines—and 

that is a term that the docs have used in describing them to me— 

are chronically in short supply. Our hospitals are scrambling to 

meet the needs of patients. 

I have read the testimony that we are going to be presented 

today, and I have to say right at the outset that I think that much 

more drastic and far-reaching and aggressive measures are necessary than have been proposed in any of the testimony, any of the 

GAO report that has been submitted so far. 

We have a working group here that has been laboring on this 

issue, but I am determined that at least I will be proposing more 

aggressive measures that are necessary to crack down on what appear to be anti-consumer practices. 

This market is simply not working. It cannot be allowed to continue in the dysfunctional fashion that it is right now. It is in many 

respects similar to the kind of monopolistic or oligarchic markets 

that we’ve seen in other areas where essential products are, in effect, manipulated according to price and supply, and these are essential products. 

The shortages are creating a public health menace, and the anticonsumer practices clearly promote a gray market, so-called gray 

market that drastically inflates prices and contributes to the shortages. We ought to have zero tolerance for this kind of profiteering 

and price gouging, and we ought to do whatever is necessary to as-
12 

sure supplies, adequate supplies of these drugs. Whether it’s oncology or anesthesiology, these drugs are needed and they should be 

provided, and stronger governmental action seems to be absolutely 

necessary. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Blumenthal. 

Senator Whitehouse. 

STATEMENT OF SENATOR WHITEHOUSE

Senator WHITEHOUSE. Mr. Chairman, thank you. I just wanted 

to add to the record of these proceedings that in Rhode Island, 

we’re getting reports that it tends to be vulnerable populations that 

are going without or facing the risk of not having the prescription 

drugs that they need. 

We’ve heard from the medical society that pediatricians are feeling a particular pinch, and one particular Rhode Island institution 

that we are very proud of is Women and Infants Hospital, which 

is really renowned throughout the region. We have people fly in 

from other States and countries to take advantage of the highly 

specialized care available there. It is a world-class facility, and they 

are facing drug shortages in chemotherapy, in anesthesia, and in 

things as simple as parent-child nutrition, potassium and magnesium, things like that. 

There’s a drug called doxil that is in such short supply that 

Women and Infants now has a waiting list for new cancer patients 

that require that drug, and to meet their existing need they’ve had 

to go into the gray market that Senator Blumenthal referred to, 

which is way above market price and is a market in which people 

believe a certain amount of hoarding and gaming for price gouging 

purposes is taking place. 

This is hitting home in Rhode Island, and so I’m very grateful 

to you, Mr. Chairman, for holding this hearing. Thank you. 

The CHAIRMAN. Thank you, Senator Whitehouse. 

I thank all the Senators. This is such an important issue, I just 

thought it worthwhile for every Senator to express himself on this 

issue before we get to our panels, and so I appreciate that very 

much. 

We’ll call our first panel. Dr. Glied and Dr. Kweder, please come 

to the table. I have Dr. Glied on this side and Dr. Kweder on that 

side. 

Our first witness is Dr. Sherry Glied, the Assistant Secretary for 

Planning and Evaluation with U.S. Department of Health and 

Human Services. Dr. Glied provides guidance and economic analysis to the Department on Health Policy. In October her office 

issued a report entitled Economic Analysis of the Cause of Drug 

Shortages. 

She has previously served as a senior economist for health care 

policy on the President’s Council of Economic Advisors under Presidents Bush and Clinton. 

Dr. Glied, we thank you for being here today. 

Next we have Dr. Sandra Kweder, Deputy Director of the Office 

of New Drugs in the Center for Drug Evaluation and Research in 

the Food and Drug Administration. As you can tell by her uniform, 

Dr. Kweder is a career public health officer who works on a daily 
13 

basis at FDA to ensure that drugs we use in this country are safe 

and effective for their intended uses. Her duties also include supervising FDA’s Office of Drug Shortages. 

We have two people who are quite knowledgeable about this 

issue, and we appreciate your being here. 

We’ll start with you, Dr. Glied. 

I’ll just say, both of your statements will be made a part of the 

record in their entirety. If you could sum up in 5, 6, 7 minutes, 

we’d appreciate it. Then we can get into a discussion. 

Dr. Glied, please proceed. 

STATEMENT OF SHERRY GLIED, Ph.D., ASSISTANT SECRETARY 

FOR PLANNING AND EVALUATION, DEPARTMENT OF 

HEALTH AND HUMAN SERVICES, WASHINGTON, DC 

Ms. GLIED. Thank you, Mr. Chairman, members of the committee. I’m honored to be here today to discuss the work we’ve been 

doing at ASPE on the economics of this terrible problem of drug 

shortages, and I’m going to confine my remarks today to just two 

points. 

First, why are there shortages in the market for some medically 

necessary drugs when shortages are not a feature of the U.S. economy in general? We don’t usually see those in other markets. 

Shortages of most products in most markets lead prices to rise, 

and those increases in price cause consumers to buy less of a product, and they lead producers to manufacture more of it. That process does not happen in these markets. 

The problem is not the prices. Our analyses show that the prices 

of drugs in these markets do rise in response to shortages in just 

the same way they do in other markets. But these short-run price 

increases have very little impact on either the demand for these 

products or on their supply. 

On the demand side, by definition, these drugs are medically necessary, so treatment patterns don’t change very much even when 

prices rise, and that’s what we would like to see. 

On the supply side, the kinds of drugs that we now see in shortage are produced using costly, very specialized equipment. Building 

a new production line and increasing capacity in this market takes 

several years and can cost hundreds of millions of dollars. In the 

short run, manufacturers can and do respond to price increases by 

switching among the approved product within a class using the 

same production line or factory. So if you think about these production lines, they can produce many different drugs within a class, 

and the manufacturers can switch among them. 

Unfortunately, switching among products often just shifts the 

shortage from one drug in a class to another drug in the same 

class. 

Manufacturers can also respond to price increases by increasing 

the level of capacity utilization in their plants, moving from, say, 

two shifts a day to three. But we’ve learned that most manufacturers in this sector today are operating at full capacity, essentially 

24/7, and operating 24/7 can limit their ability to keep their plants 

in good working order and may be contributing to the quality problems that we’re seeing in this sector. 
14 

Now, in the longer run, manufacturers can expand capacity if 

they see a profitable market ahead of them. In our analyses, we 

found that the market for sterile injectable generic drugs, cancer 

drugs in particular, is robust and is growing. Over the last 5 years, 

the size of the overall generic sterile injectable market expanded by 

over 50 percent, and they anticipate to grow even further. And 

manufacturers are responding to this anticipated growth. Several 

have told us that they are investing substantially to upgrade existing facilities and to build new facilities to serve this growing market. Those facilities are not likely to be online for the next year to 

3 years, however. 

The second point I wanted to touch on is the source of the prices 

in this market. Unlike the situation with most drugs in the United 

States, sterile injectable drugs are not purchased directly by patients, and they are not reimbursed directly by insurance. Rather, 

these drugs are purchased by health care providers, by doctors and 

hospitals, who are paid for the delivery of the service that includes 

the drug, and they are sometimes also paid a separate fee to compensate for the cost of procuring the drug. They obtain the drugs, 

in turn, through group purchasing organizations, which negotiate 

prices with manufacturers on behalf of their clients. 

Group purchasing organizations compete among themselves to 

negotiate the lowest possible price at which they can get an adequate supply of drugs from manufacturers. That single negotiated 

price applies to the hospital or physician’s purchases of that drug 

regardless of the insurance held by the patient who ultimately uses 

the drug. 

As we think about strategies to address this problem of shortages, it’s important to keep in mind these two points, first, that 

supply across the sector does not increase in the short run in response to price increases, and that there is a very sharp disconnect 

between the fees paid to providers and the amount that group purchasing organizations pay to manufacturers. 

In summary, our analyses suggest that the current shortages will 

likely be fully resolved only when new supply sources come online. 

In the meantime, managing shortages effectively in the short run, 

as the FDA’s Drug Shortage Program is doing, is likely to be the 

best approach to addressing this serious public health problem. 

Thank you. I’d be happy to take any further questions. 

[The prepared statement of Ms. Glied follows:] 

PREPARED STATEMENT OF SHERRY GLIED, PH.D. 

INTRODUCTION

Mr. Chairman and members of the committee, I am Dr. Sherry Glied, Assistant 

Secretary for Planning and Evaluation at the U.S. Department of Health and 

Human Services. I am honored to be here today to discuss the economics of drug 

shortages. 

For some patients, a change in treatment regimen because an important medication is not available can seriously reduce the quality of care they receive and threaten their ability to get better. We have heard the stories of a number of people who 

have faced this problem. Patients, like Jay Cuetara, a cancer patient from California 

with whom I met earlier this fall, are the ones who suffer when the center where 

they receive chemotherapy runs out of the drugs used to treat their cancer. 

The Food and Drug Administration (FDA) has successfully prevented 233 drug 

shortages since the beginning of 2010 and is taking additional actions to address 

drug shortages in response to the President’s October 31 Executive order. In the 4 
15 

weeks following the issuance of the Executive order, FDA has received 61 notifications, a sixfold increase over the average notifications per month in the previous 10 

months. 

Drug shortages have been increasing in frequency and severity in recent years 

and are adversely affecting patient care. A small number of drugs in the U.S. experience a shortage in any given year, but the number of reported prescription drug 

shortages in the United States has nearly tripled between 2005 and 2010, increasing from 61 to 178. In 2011, FDA has continued to see an increasing number of 

shortages, particularly among older sterile injectable drugs, including cancer drugs, 

anesthetics for surgery, drugs for emergency medicine, and electrolytes for intravenous feeding. There are many causes to this challenging problem and addressing 

this significant public health threat requires the urgent attention of industry, other 

stakeholders, and government. 

BACKGROUND

Market Behavior 

Firms have been increasing their levels of manufacturing capacity utilization to 

accommodate the increase in the volume of chemotherapy drugs administered and 

the expansion of products available for generic manufacturing because of patent expiration. Shortages have been concentrated in drugs where the volume of sales was 

declining in the years preceding the shortage, suggesting that manufacturers are diverting capacity from shrinking lines of business to growing ones. Quality problems, 

potentially caused by the high level of capacity utilization, have led some plants to 

shut down. A recent report by FDA found that quality problems at drug manufacturing facilities resulting in disruptions in supply were the leading cause of drug 

shortages, accounting for 43 percent of all shortages. Firms have not responded 

quickly to changes in demand and prices in the sterile injectable drug industry by 

building new plant capacity because of the high fixed costs of specialized production. 

Furthermore, because shortages are generally uncommon and occur in drugs for 

which capacity is highly specialized, and because there are few penalties for failing 

to supply contracted drugs, there is no financial return to manufacturers from investing in excess capacity—that is, capacity that is not used outside a supply shortage, and thus earns no revenue except during a supply shortage. 

Generic drug manufacturers must make strategic decisions about how to deploy 

existing production capacity among products, based on their expectations about 

what choices their competitors will make and what demand will be. In general, 

manufacturers will prefer to concentrate on markets with fewer competitors, where 

they are likely to face less price competition. Conversely, purchasers, such as GPOs, 

will prefer that multiple competitors produce each product. If manufacturers misjudge their competitors’ choices, there may be excess supply and depressed prices 

for some drugs and insufficient supply and shortages of others. In small markets, 

such as those for sterile injectable drugs, these decisions can lead to considerable 

volatility in the market. 

WHY DO SHORTAGES OCCUR IN THE PRESCRIPTION DRUG MARKET?

The prescription drug and vaccine market is characterized by sporadic shortages 

of individual drugs and occasional periods during which many drugs in a class are 

in shortage. Although product shortages usually lead prices to rise, consumers to 

buy less, and producers to manufacture more, that process does not happen in the 

markets for some medically necessary drugs, especially sterile injectable drugs. By 

and large, neither the supply nor the demand for medically necessary drugs responds quickly when the prices of these drugs rise. 

By definition, these drugs are medically necessary, so they have few substitutes 

and patients cannot generally shift their use over time. Unlike consumers of other 

goods and services, patients, hospitals, and physicians generally do not change 

treatment patterns when prices rise. 

Suppliers are also quite insensitive to changes in price, particularly in the shortrun. The kinds of medicines that are in shortage are produced using costly, specialized equipment and require complex production processes that must meet Current 

Good Manufacturing Practice guidelines. Manufacturers can and usually do substitute products within a class using the same production line, but in most cases, 

each individual drug requires regulatory approvals, including manufacturing controls, which are limited to that particular drug. It generally takes a long time— 

years in some cases—for the industry to increase capacity in response to an increase 

in prices. If the increase in prices is expected to be temporary (as would be expected 

in the case of a shortage due to a production line disruption), investments in in-
16 

1 National Cancer Institute analysis of IMS National Sales Perspectives. In Economic Analysis 

of the Causes of Drug Shortages, U.S. Department of Health and Human Services, Office of the 

Assistant Secretary for Planning and Evaluation, October 2011, footnote 10. 2 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Economic Analysis of the Causes of Drug Shortages, October 2011. http:// 

aspe.hhs.gov/sp/reports/2011/drugshortages/ib.shtml. 

creased capacity are unlikely to occur. In the longer run—over a period of 2–3 years, 

for example—supply will be much more responsive to price. 

This low level of price responsiveness on both the demand and supply sides of the 

market for many medically necessary products means that any changes from historical patterns in supply or demand can lead to shortages of these drugs. 

THE CASE OF STERILE INJECTABLE CANCER DRUGS: SUPPLY AND DEMAND

In most cases, sterile injectable drugs are not purchased directly by patients or 

reimbursed directly by insurance. Rather, these drugs are purchased by health care 

providers (generally hospitals and physicians). Providers are paid for the delivery 

of the service that includes the drug. Public and private insurers also pay a separate 

fee to compensate for the cost of the drug. Under the Medicare program, the separate fees for sterile injectable drugs generally are paid under Part B. 

Most hospitals and physicians do not purchase sterile injectable drugs directly 

from the manufacturer. Rather, these drugs are purchased through group purchasing organizations (GPOs), which negotiate prices with manufacturers on behalf 

of their clients. GPOs do not take physical possession of the drugs. Instead, a wholesaler takes possession of the drug and then sells the drugs to hospitals and physicians at the GPO negotiated price. 

While GPOs negotiate the lowest prices they can with manufacturers, based on 

anticipated volume of sales, their clients are not compelled to purchase drugs from 

a contracted manufacturer, so the GPO contracts do not necessarily contain minimum quantity guarantees. GPO contracts are generally in place for years and typically include price adjustment clauses. If a GPO is offered a lower price by a competing manufacturer, the original contracted manufacturer has a right of first refusal to match the new price. GPO contracts also typically include failure-to-supply 

clauses. These clauses generally require the manufacturer to reimburse the GPO for 

the difference between the negotiated price and the purchased price when providers 

must buy the drug from another source. These failure-to-supply clauses, however, 

provide no reimbursement if there are no alternative sources for the drug, do not 

reimburse for resources expended looking for other sources, and are of limited duration. 

Manufacture of generic sterile injectable drugs is a concentrated market with 7 

manufacturers making up a large percentage of the market. Most of the production 

of a given drug is by three or fewer manufacturers. Analysis of a sample of 33 generic sterile injectable cancer drugs shows that for 28 of these drugs, at least 90 

percent of unit sales in 2010 were made by three or fewer manufacturers.1 These 

manufacturers typically each operate a small number of facilities at which injectable 

drugs can be produced. These facilities, in turn, each contain several manufacturing 

lines. A particular drug can be produced on one or more of these lines in runs that 

may last from hours to weeks. The same line may be used for multiple different 

drugs produced in separate batches; however, certain drugs (including cytotoxic 

drugs) may only be produced on certain types of lines and in certain types of facilities, so the extent of substitution is limited. 

It is important to note that the low price responsiveness of demand for sterile 

injectable drugs also has implications for inventories and capacity decisions. If there 

is an excess supply of a particular drug, there may be no market for it, even at a 

low price. The combination of limited ability to compel supply (through failure-tosupply clauses or contractual breach provisions) and low price responsiveness means 

that manufacturers face an asymmetry of incentives: there is little cost (except 

reputational) of producing too little of one drug (rather than another), but a potentially high cost of producing too much of that drug. 

ASPE recently released a report on drug shortages that focused on sterile 

injectable cancer drugs, one of the classes of drugs where there are many shortages.2 The market for sterile injectable cancer drugs is robust and growing. FDA 

analysis of IMS data shows that the number of vials of sterile injectable cancer 

drugs shipped between 2006 and 2010 increased by 14 percent, in part because of 

the aging of the population. Similarly, ASPE analysis of Medicare Part B data 

shows that between 2006 and 2011, the volume of services for sterile injectable cancer drugs increased by about 20 percent. 
17 

3 News reports and personal communication with manufacturers. In Economic Analysis of the 

Causes of Drug Shortages, U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, October 2011, footnotes 16–17. 4Donald Gross, John F. Shortle, James M. Thompson, and Carl M. Harris, Fundamentals of 

Queuing Theory, Fourth Edition, John Wiley & Sons, Inc., Hoboken, NJ, 2008. 5 U.S. Food and Drug Administration, A Review of FDA’s Approach to Medical Product Shortages, October 2011. http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/ucm2750 

51.htm. 

That increase in volume, however, did not occur across all sterile injectable cancer 

drugs. Using Part B data, ASPE compared the volume of services prior to shortages 

for sterile injectable cancer drugs that did and did not experience a shortage. On 

average, drugs that subsequently experienced a shortage are those in which the volume of sales was declining in the 2006–8 period prior to the shortages. Drugs that 

have not experienced a shortage since 2008 had an average 11 percent increase in 

volumes of services over this period, and a similar increase in the 2008–11 period 

that followed. The results suggest that manufacturers with limited capacity may be 

making strategic decisions about which drugs to produce when faced with falling demand for particular drugs. 

THE CASE OF STERILE INJECTABLE CANCER DRUGS: CHANGES IN MARKET STRUCTURE

AND PRODUCTION CAPACITY

Manufacturers can increase their portfolio of generic sterile injectable drugs by filing an abbreviated new drug application (ANDA) with the FDA, which must be approved before the manufacturer can market the generic drug. More ANDA approvals 

mean that manufacturers have more drugs to choose to manufacture with their existing capacity and therefore, manufacturers may substitute newer drugs for other 

drugs. Alternatively, they may increase the rate at which they make use of their 

existing manufacturing capacity. There was a substantial increase in the number 

of new injectable ANDA approvals beginning in 2008 (prior to the increase in sterile 

injectable drug shortages). 

While the overall market for sterile injectable cancer drugs increased by 14 percent between 2006 and 2010, the number of vials sold by generic drug manufacturers increased much more rapidly—by nearly 30 percent. Over this period, the overall generic sterile injectable drug market (including cancer drugs and other classes 

of products) expanded by 52 percent. Some of this expansion was accompanied by 

reductions in brand manufacturers’ production of these drugs. 

Our analysis showed that generic manufacturers have expanded not only the volume of product they produce but also the range. In every year between 2006 and 

2010, the number of new combinations in the market (a manufacturer producing a 

drug that it had not previously produced) exceeded the number of exits. 

Expansion of the scope of production is also evident in the decisions of leading 

manufacturers to increase future manufacturing capacity. Several leading manufacturers of generic sterile injectable drugs indicated that they are upgrading existing 

facilities or building new facilities to serve this market. According to news reports 

and discussions with manufacturers, Hospira is investing $65 million in capital improvements in sterile injectable drug manufacturing sites, Teva is opening a new 

manufacturing site, and Ben Venue is opening a new, expanded facility to replace 

an older manufacturing facility.3 These investments will increase capacity in both 

older and newer generic sterile injectable drugs. 

Unfortunately, this new capacity is unlikely to come online for at least another 

18 months. Meanwhile, when there is little excess manufacturing capacity, producing a new drug will often require manufacturers to reduce or stop production of 

another drug or to operate at a much higher than normal level of capacity utilization. 

Increasing utilization of capacity is a good way of expanding supply in the shortrun, but poses risks. High rates of capacity utilization may also limit the ability of 

manufacturers to perform routine maintenance and keep facilities in good order.4

A recent report by FDA found that quality problems at drug manufacturing facilities 

resulting in disruptions in supply were the leading cause of drug shortages, accounting for 43 percent of all shortages.5

Supply Disruptions 

The structure of the sterile injectable market, the recent expansion in volume and 

scope, and the consequent very high level of capacity utilization, mean that small 

disruptions to supply—such as may occur because of quality problems—which would 

otherwise be absorbed through diversion of capacity, can lead to cascading and persistent shortages. 
18 

Over time, entry and expansions in capacity in the industry, should lead to a situation where shortages due to supply disruptions are sporadic and rare. In the current environment, where capacity is severely constrained, shortages induced by disruptions can cascade throughout the sector and persist for long periods of time. 

RECOMMENDATIONS

The Administration is doing everything in its power to address the shortages administratively. There a few areas where additional authority or action by Congress 

may be needed or where the private sector can take steps. Based on our examination of the underlying factors that lead to periods of shortage in the prescription 

drug market, and particularly the underlying market factors that have contributed 

to the current shortages in the area of sterile injectable drugs, we offer a few recommendations. 

Policymakers must balance the short-run benefits of tailoring regulatory responses to specific situations against the risk of strategic behavior and consequent 

reductions in competition in the long run. 

Steps that both expedite expansion of supply and maintain product quality in sectors with high capacity utilization could reduce the risk of shortages not only in the 

current situation, but in the future as well. To facilitate this, FDA can expedite review of new manufacturing capacity in this area, and we understand that FDA is 

already doing this and committed to continuing to do so. 

Private organizations that purchase drugs (including GPOs), can help to alleviate 

future shortages by negotiating with drug manufacturers to strengthen the failureto-supply requirements in their contracts. Such contractual changes are likely to 

incentivize drug manufacturers to invest in extra capacity of both production lines 

and active pharmaceutical ingredients. 

As part of the Administration’s broader effort to work with manufacturers, health 

care providers, and other stakeholders to prevent drug shortages, the President has 

directed the FDA to take steps that will help to prevent and reduce current and 

future disruptions in the supply of lifesaving medicines and FDA is responding to 

this directive. 

The Administration also announced on October 31, 2011, its support for bipartisan 

legislation (S. 296 and H.R. 2245) that would require all prescription drug shortages 

to be reported to FDA and would give FDA new authority to enforce these requirements. 

SUMMARY

In summary, the current class-wide shortages in the sterile injectable drug industry appear to be a consequence of a substantial expansion in the scope and volume 

of products produced by the industry that has occurred over a short period of time, 

without a corresponding expansion in manufacturing capacity. The current shortages will likely be resolved when new supply sources come online as the manufacturing industry increases its capacity. In the meantime, the FDA’s Drug Shortage 

Program is working diligently with manufacturers and other stakeholders to mitigate the effects of the shortages and the Administration is doing everything in its 

power to address shortages administratively. 

I appreciate the opportunity to speak with you about our analysis of drug shortages. I would be happy to respond to any questions. 

The CHAIRMAN. Dr. Glied, thank you very much. 

Dr. Kweder. 

STATEMENT OF SANDRA KWEDER, M.D., DEPUTY DIRECTOR, 

OFFICE OF NEW DRUGS, FDA, WASHINGTON, DC 

Dr. KWEDER. Good morning, Mr. Chairman and members of the 

committee. Thank you, thank you, thank you for holding this hearing. I am Dr. Sandra Kweder, as introduced. I’m the Deputy Director in the Office of New Drugs in FDA. 

This problem of drug shortages is a very serious problem for patients, and it’s a serious problem for medical care providers in this 

country, and I think it touches every one of us or our families in 

some way. 
19 

My colleagues and I, at FDA, take this problem very seriously, 

and we look forward to continuing to work with you and our other 

colleagues in the profession to find short- and long-term solutions. 

Today I want to highlight FDA’s ongoing actions to prevent and 

mitigate shortages, as well as mention some more recent efforts by 

the Administration to address this problem. 

You already stated that the number of drug shortages has been 

rising steadily over the past 5 years, to a level that we would never 

have anticipated. In 2005, we reported a total of 61 actual drug 

shortages for that year. By 2010, the number was 178 in that year. 

That rising trend has continued into 2011. Between January and 

October of this year, we were tracking 220 actual shortages. That 

doesn’t include the ones that we prevented. 

In July of this year, Dr. Howard Koh, the Assistant Secretary of 

Health at HHS, started to convene a series of meetings with representatives from across the Department, including us and Dr. 

Glied, to try and understand more about the roots of drug shortages and what we could do with our existing authorities to decrease their frequency. 

In September, we at FDA held a public meeting to try and gain 

additional insights into the causes and impacts of drug shortages, 

and some possible strategies for preventing or mitigating them. We 

were open to any ideas that we hadn’t already thought of. The insights that we gained from that meeting on the effects of this problem on patient care and patients were staggering. 

On October 31 of this year, the Administration took a series of 

steps to reduce drug shortages, including issuance of an Executive 

order by the President, an announcement of support for bipartisan 

legislation, and FDA directly communicating with manufacturers to 

encourage them to voluntarily continue to report any problems that 

they were having that might ultimately result in a drug shortage. 

That Executive order had three main components. One was directing FDA to use all appropriate administrative tools to require 

manufacturers to provide us advance notice of shortages. It directed us to continue to expand our efforts to expedite our work in 

reviewing manufacturing applications and conducting inspections 

where needed, and to work with the Department of Justice to examine whether secondary wholesalers or other market participants 

were responding inappropriately or illegally by creating a gray 

market with price gouging. 

In parallel, a number of things occurred. HHS released two 

reports, one by Dr. Glied and her colleague, and one by FDA to report on our views on the current status of medical product shortages and the agency’s role in monitoring, preventing, and mitigating them. That same day, we in FDA sent a letter to every single pharmaceutical manufacturer reminding them of what their 

legal obligations were to report to us under very narrow circumstances about discontinuing product production, but also urging them to notify us early when they had any problem that might 

result in a drug shortage. 

Since that time, we at FDA have been continuing to tackle the 

problem of drug shortages head on. There is no question that we 

have our work cut out for us, but this is a public health crisis, and 

we’re responding. We have always had strong internal working re-
20 

lationships in the agency on these matters, and we are continuing 

to expand our efforts to communicate with the industry in this 

work. 

Since October 31, there has been a significant increase in notifications about the number of potential shortages to us. Our efforts 

are having an effect. We used to get about 10 notifications a month 

of a potential shortage. Since October 31, we have had 61 notifications, a sixfold increase. They continue to identify areas where we 

can help, and we have helped in many of those cases. But they also 

continue to show us serious quality-related problems that firms are 

having in production of quality drug products. 

Nonetheless, as a result of these reports, we’ve intervened to prevent 96 drug shortages. Now, in one intervention alone, we prevented 86 shortages at a single plant. We’re working to resolve 

quality problems with firms and review and expedite applications 

that they have in place that would mitigate any potential shortage. 

We have doubled the number of our staff in the drug shortage program. We have drafted guidance for industry on what exactly we 

think is helpful for them to report and under what circumstances, 

and just today we’ve published an interim final rule that clarifies 

and expands some of the definitions within our legal authority to 

require reporting for product disruptions where a company is the 

sole source provider of an important drug. 

Since October 31, we’ve been engaging in a series of meetings 

with stakeholders, including individual companies, industry organizations, medical care providers, Pharma and bio and other organizations who are interested in finding solutions to this problem. One 

of our most important goals we have for these meetings is finding 

ways to facilitate industry commitment and performance in producing high-quality products. 

On a separate track, I want to mention something critical. Many 

characterize FDA’s activities in this area in working with companies as going in with an inspection, walking out the door, and leaving the company a list of deficiencies and telling them they need 

to shut down overnight. Nothing could be further from the truth. 

These companies are usually long aware of the problems that 

they have had. We have cited them a number of times, and we continue to meet regularly with firms that are having difficulty maintaining quality manufacturing. We are also beginning the process 

of improving our new drug shortage database for internal tracking 

of shortages, as well as utilizing the database to develop better prediction models for who might be at risk. 

And finally, we’ve initiated communication with the Department 

of Justice as directed in the Executive order about how to share information that we receive about price gouging out in the community, and we understand that the Department of Justice is also 

reaching out to the National Association of Attorneys General to 

understand whether there are State and local laws that can help 

address some of these problems. 

Overall, our goal is to ensure that we and all of our stakeholders 

share and act on the same commitment to high-quality drugs that 

the American public can continue to rely on when they need them. 

I look forward to working with you, and I am happy to answer 

questions. 
21 

1 CDER Manual of Policies and Procedures (MAPP) 6003: http://www.fda.gov/downloads/ 

AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ManualofPoliciesProcedures/UCM079936.pdf. 2 ‘‘A Review of FDA’s Approach to Medical Product Shortages Drug Shortage Report’’: http:// 

www.fda.gov/AboutFDA/ReportsManualsForms/Reports/ucm275051.htm. 3 ‘‘A Review of FDA’s Approach to Medical Product Shortages Drug Shortage Report’’: http:// 

wwwfda.gov/AboutFDA/ReportsManualsForms/Reports/ucm275051.htm. 

[The prepared statement of Dr. Kweder follows:] 

PREPARED STATEMENT OF SANDRA KWEDER, M.D. 

INTRODUCTION

Mr. Chairman and members of the committee, I am Dr. Sandra Kweder, Deputy 

Director, Office of New Drugs in the Center for Drug Evaluation and Research 

(CDER) at the Food and Drug Administration (FDA or the Agency). Thank you for 

the opportunity to be here today to discuss the growing problem of drug shortages. 

This is a very troubling situation and one that FDA takes very seriously. We are 

committed to addressing this problem and are eager to continue to work with others 

to help find short- and long-term solutions to the challenge of drug shortages. 

Today I will provide background on drug shortages, explain some of the reasons 

for drug shortages, and discuss FDA’s ongoing actions to prevent or mitigate shortages as well as the more recent efforts by the Administration to further reduce and 

prevent drug shortages. The latter includes an Executive order issued by President 

Obama on October 31, 2011, that will help address the shortage of prescription 

drugs and help ensure patients have access to the lifesaving medicines they need. 

Background 

FDA defines a drug shortage 1 as a situation in which the total supply of all clinically interchangeable versions of an FDA-regulated drug is inadequate to meet the 

current or projected demand at the patient level. The impact of drug shortages on 

patients can be significant and even life-threatening. Certain drugs that recently 

have been in shortage—such as ‘‘crash cart’’ drugs—can literally be lifesaving in the 

acute setting, while others, such as outpatient chemotherapy drugs, must be administered within days or weeks to provide maximum benefit. Shortages of these drugs 

not only have an impact on clinical decisionmaking, but they could also significantly 

affect patient outcomes. For example, a shortage of propofol, which is used as a sedative and for general anesthesia, led clinicians to substitute etomidate, resulting in 

eight suspected cases of phlebitis (inflammation in a vein) in a single hospital system. Other drugs that have experienced shortages, such as the cancer drug 

cytarabine, arc important drugs not only because they treat a critical disease, but 

also because they lack an effective alternative. 

In addition, drug shortages are impacting research studies. The National Cancer 

Institute (NCI) recently reported that while there have been periodic shortages of 

different cancer drugs over the past several years, nothing has approached the scale 

of the current shortages of chemotherapy drugs. NCI notes that the inability to obtain adequate supplies of these cancer drugs for research has resulted in promising 

clinical trials being suspended indefinitely; patient enrollment being abruptly halted; and trials being delayed while alternative treatment regimens are developed. 

FDA’s awareness of these consequences for patients drives our efforts to prevent 

and resolve shortages as soon as possible. 

The number of drug shortages has been rising steadily over the last 5 years. In 

2005, CDER reported a total of 61 shortages; by 2010, that number had risen to 

178.2 The rising trend of drug shortages has continued into 2011, with 220 shortages tracked by FDA from January through October of this year. Although shortages can occur with any drug, shortages of sterile injectables currently make up a 

large and increasing share of these shortages, despite the fact that sterile injectable 

drugs comprise a small percentage of the overall prescription drug market. These 

include critical products such as oncology drugs, anesthetics, parenteral (intravenous) nutrition drugs, and many drugs used in emergency rooms. 

Of the 127 drug shortages tracked by FDA during the period from January 1, 

2010, to August 26, 2011, oncology drugs accounted for 28 percent of shortages, followed by antibiotics at 13 percent. One hundred eighteen shortages (93 percent) involved medically necessary drugs and 52 of the shortages (41 percent) were both 

medically necessary and sole-source drugs.3 For the purpose of prioritizing our work 

to address shortages, we consider a drug medically necessary if it is used to prevent 
22 

4 Unapproved drugs are drugs that have not received FDA approval to be legally marketed. 

5 ‘‘A Review of FDA’s Approach to Medical Product Shortages Drug Shortage Report’’. http:// 

www.fda.gov/AboutFDA/ReportsManualForms/Reports/ucm275052.htm. 6 ‘‘A Review of FDA’s Approach to Medical Product Shortages Drug Shortage Report’’: http:// 

www.fda.gov/AboutFDA/ReportsManualForms/Reports/ucm275051.htm. 

or treat a serious or life-threatening disease or medical condition for which no acceptable alternative drug is available. 

Reasons for Drug Shortages 

There is no single reason that drug shortages occur. The Agency has identified 

a variety of root causes of drug shortages, some of which I will discuss here. Ultimately, in any given drug shortage, many factors are involved, and underlying 

causes may operate alone or in combination to result in an individual shortage. 

These include, but are not limited to, industry consolidation, shortages of underlying 

raw materials, inventory and distribution practices, difficulty in producing a given 

drug (e.g., sterile injectables, which entail a much more complex manufacturing 

process than solid dosage forms), quality and manufacturing problems, production 

delays, discontinuations for business reasons, and unanticipated increases in demand. 

Of the 127 drug shortages tracked by FDA during the period from January 1, 

2010, to August 26, 2011, 50 percent were generic or unapproved drugs 4 (often 

drugs that have been on the market for decades, but which have never received 

FDA approval), 43 percent were innovator drugs, and 7 percent had both categories 

in shortage. Sterile injectable medications accounted for 102 drugs in shortage (80 

percent of the total 127) and approximately 54 percent of these shortages were due 

to product quality issues such as particulates, microbial contamination, impurities 

and stability changes resulting in crystallization.5

Industry consolidation has also contributed to the drug shortage problem. In 2010, 

the top five generic sterile injectable manufacturers accounted for 80 percent of the 

sterile injectables sold in the U.S. market by volume.6 When a firm has a manufacturing or quality problem, they may voluntarily suspend production so they can 

identify and address the root cause of the product—quality problem. Some of these 

quality issues are complex and firms need to take significant time to correct the underlying cause of the problem. Such is the case with shortages of older sterile 

injectables, which involve special techniques and processes to maintain sterility. 

When one firm experiences a quality problem that results in production holds or 

slowdowns, the remaining firms are often not able to make up the shortfall, because 

they have limited manufacturing capacity. 

Inventory and distribution practices by manufacturers and distributors can alter 

the availability of drugs, often creating short-term shortages. Better technology for 

supply management may lead manufacturers or distributors to reduce the size of 

their inventories. This minimizes product loss from short expiration times and carrying costs. However, smaller inventories mean that there are fewer reserves available to respond in the event of production problems. Overall, it does appear that 

inventories are smaller due to a shift to ‘‘just in time’’ production, and that leaves 

little leeway for even small changes in supply. 

Some reports in the media about drug shortages have focused on the lack of raw 

materials necessary to manufacture certain classes of drugs that are currently experiencing shortages. In the past, some shortages of drugs have been due to shortages 

of underlying raw materials, particularly of the active pharmaceutical ingredient 

(API) for a specific drug. However, this does not appear to be a significant contributor to the current shortages of sterile injectables. In fact, in 2010 and 2011, drug 

manufacturers cited unavailable API as the primary cause in less than 10 percent 

of drug shortage situations. 

Actions to Prevent or Mitigate Shortages 

In 1999, FDA formed the Drug Shortage Program (DSP) within CDER in an effort 

to begin monitoring and mitigating the impact of drug shortages. DSP facilitates the 

prevention and resolution of shortage issues by collaborating with FDA experts, industry, and other external stakeholders. In addition, DSP provides information 

about drug shortages to the public, health care professional organizations, patient 

groups, and other stakeholders. 

When FDA becomes aware of a potential drug shortage, either from pharmacists, 

physicians, pharmacy organizations, manufacturers or other sources, the Agency 

works collaboratively with the affected firm or firms to return the product to its 

usual market availability as quickly and as safely as possible, while helping prevent 

any harm to patients. Although FDA cannot require firms to continue production 
23 

7http://www.fda.gov/Drugs/DrugSafety/DrugShortages/ucm050792.htm. 

of a product or increase production in response to a shortage, it does encourage 

other firms that make the drug to ramp up production, if they are willing and able 

to do so. FDA also expedites the review of submissions from manufacturers that 

may alleviate the drug shortage, which may include requests from existing manufacturers to extend the expiration date of products, make manufacturing changes to increase capacity, use a new raw material source, or change product specifications, as 

well as applications from new manufacturers who may be willing to enter the market to address a shortage situation. When a shortage is caused by manufacturing 

and quality problems, FDA works directly with the affected firm to develop shortand long-term solutions to the problems. FDA can also use its regulatory discretion 

for a manufacturer to continue marketing a medically necessary drug, if the manufacturer can develop a method to resolve a quality issue prior to the drug’s administration. 

FDA carefully considers the impact of any drug shortage on patient care and access before taking any enforcement action. One example of a situation in which FDA 

worked closely with a manufacturer to address a quality concern was the case of 

the shortage of the drug cytarabine, a sterile injectable drug that is used to treat 

certain types of leukemia. Beginning in 2010, a manufacturing change led to crystal 

formation in the vials of cytarabine, which poses an extremely dangerous situation 

to patients. FDA worked with the manufacturer and found that if the vials were 

warmed, the crystals would dissolve and the danger to patients would be mitigated. 

Utilizing our regulatory discretion, FDA permitted the manufacturer to ship the 

vials with a letter to health care professionals, notifying them to inspect for crystal 

formation and, if present, to warm the vials to dissolve crystals to ensure patient 

safety. The use of regulatory discretion helped alleviate this critical shortage temporarily until the manufacturer was able to determine the cause and resolve the crystal formation problem. 

In other cases, FDA has been able to mitigate potential shortages due to the discovery of metal shavings and other foreign particles in injectable drug products. A 

recent example was sodium phosphate, which is a medically necessary electrolyte 

needed for IV nutrition in critically ill patients. In early 2011, the manufacturer 

found foreign particles in the drug product, posing a significant safety concern to 

patients. After the manufacturer generated data showing the particles could successfully be removed with a filter and with that process the drug could be used safely, FDA exercised regulatory discretion for the drug to be shipped with a letter to 

notify health care professionals that the filter needed to be used with the drug. This 

allowed the drug to be available for patients while the firm addressed the particulate issue for future production and averted the risk to patients of having particulate matter injected into their veins. 

FDA can also use its regulatory discretion with regard to the temporary import 

of non-FDAapproved versions of critical drugs, when a shortage cannot be resolved 

immediately. However, there are several factors that limit the applicability of this 

option. The product may already be in shortage abroad, which may hamper our ability to alleviate the problem in the United States. In addition, although there may 

be foreign suppliers that possess or have access to a particular drug, these suppliers 

are not necessarily FDA-approved and may need to be inspected, and their drug labels evaluated, before a product can be imported into the United States. Once a foreign firm is identified as willing and able to supply the drug, FDA can exercise enforcement discretion for the temporary import of a foreign drug after ensuring there 

are no significant safety or efficacy risks for U.S. patients. The temporary importation is tightly controlled and distribution is closely monitored. For example, FDA 

must ensure that drugs imported from abroad are manufactured in a facility that 

meets FDA quality standards. FDA will then post information about the imported 

drug on the drug shortage Web site.7 FDA has done this for the import of a number 

of critical drugs during a shortage, including: propofol, Foscarnet, ethiodol, thiotepa, 

norepinephrine, Xeloda, leucovorin and levoleucovorin. 

As noted above, FDA does not have the statutory authority to require firms to 

continue production if they decide to stop, or require other firms to increase production in response to a shortage. Firms are statutorily required to provide FDA with 

notice of manufacturing discontinuations only in limited circumstances, and FDA 

lacks explicit authority to impose penalties on firms that do not submit required reports of discontinuations. Prompt notification is important for all disruptions in supply that could lead to shortages. Early notification leads to a better chance of timely 

resolution. In 2010, FDA was able to prevent 38 drug shortages due to early voluntary notification from firms, and in 2011, FDA has prevented 195 drug shortages 
24 

8 ‘‘Drug Shortage Docket Web site: http://://www.regulations.gov/#!documentDetail;D=FDA2011-N-0690-0001. 9http://www.whitehouse.gov/the-press-office/2011/10/31/executive-order-reducing-prescription-drug-shortages. 10Press Release: http://www.whitehouse.gov/the-press-office/2011/10/31/we-can-t-waitobama-administration-takes-action-reduce-prescription-drug. 11http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/ucm275051.htm. 12http://www.fda.gov/Drugs/DrugSafety/DrugShortages/ucm277675.htm. 

as a result of voluntary notification and close collaboration with manufacturers to 

avert shortage situations. 

Recent Efforts to Further Reduce and Prevent Drug Shortages 

Although our work has enabled the Agency to successfully prevent 233 shortages 

since the beginning of 2010, drug shortages are on the rise. In response to this 

growing problem, the Administration has taken several recent actions to better understand and respond to drug shortages. 

In July of this year, Dr. Howard Koh, Assistant Secretary for Health at the Department of Health and Human Services (HHS or the Department), convened a series of meetings with representatives from across the Department to find out more 

about the root cause of shortages and what steps could be taken within existing authorities to decrease the frequency of shortages in the future. 

On September 26, 2011, FDA hosted a public meeting to gain additional insight 

into the causes and impacts of drug shortages, and possible strategies for preventing 

or mitigating drug shortages. Interested parties who attended included professional 

societies, patient advocates, industry, researchers, pharmacists, and other health 

care professionals. A docket has been opened in relation to the public workshop 

where comments can be received from the public.8

On October 31, 2011, the Administration took a series of steps to reduce drug 

shortages. This included the issuance of an Executive order by the President,9 which 

directed FDA, in cooperation with the Department of Justice, to take action to help 

further reduce and prevent drug shortages, protect consumers, and prevent price 

gouging. In an effort to encourage broader reporting of manufacturing 

discontinuances, the President’s order directs FDA to use all appropriate administrative tools to require drug manufacturers to provide adequate advance notice of 

manufacturing discontinuances that could lead to shortages of drugs that are lifesupporting or life-sustaining, or that prevent debilitating disease. The Executive 

order also requires FDA to expand its current efforts to expedite review of new manufacturing sites, drug suppliers, and manufacturing changes to help prevent shortages. Under the President’s Order, FDA is also directed to work with the Department of Justice to examine whether secondary wholesalers or other market participants have responded to potential drug shortages by hoarding medications or raising prices to gouge consumers, and whether these actions are consistent with applicable laws. 

On the same day the President signed the Executive order, the Administration 

announced its support for bipartisan legislation (S. 296 and H.R. 2245) 10 that would 

require all prescription drug shortages to be reported to FDA and would give FDA 

new authority to enforce these requirements. The Administration also announced 

that, over the coming weeks, FDA would provide additional staffing resources to enhance the Agency’s ability to prevent and mitigate drug shortages. HHS released 

a report, prepared by the Office of the Assistant Secretary for Planning and Evaluation (ASPE), which is detailed further in their testimony today. Additionally, FDA 

released a report entitled ‘‘A Review of FDA’s Approach to Medical Product Shortages’’ 11 on its role in monitoring, preventing, and mitigating drug shortages, which 

included recommendations to further reduce the impact of these shortages. 

In addition, FDA sent a letter to pharmaceutical manufacturers,12 reminding 

them of their current legal obligations to report certain discontinuances to the Agency, and urging them to voluntarily notify FDA of all potential disruptions of the prescription drug supply to the U.S. market, even where disclosure is not currently required by law. The letters to manufacturers and the Executive order have produced 

a significant increase in the number of potential shortages reported to FDA. In the 

10 months preceding the Administration’s actions (January through October 2011), 

the Agency received an average of approximately 10 notifications per month. In the 

4 weeks following the letters to the manufacturers and issuance of the Executive 

order, we received 61 notifications, a sixfold increase. 

Other recent activities FDA has been working on to help prevent or mitigate drug 

shortages include: 
25 

• Doubling the number of staff in the Center to assist in coordination and response activities, as well as expediting actions (e.g., inspections) that would help to 

alleviate drug shortages; • Developing several guidances for industry on reporting product disruptions, 

supply interruptions, and potential shortages; • Meeting with various stakeholders to discuss shared opportunities to prevent 

and mitigate shortages, including; the Generic Pharmaceutical Association, the 

Pharmaceutical Research and Manufacturers of America, the Biotechnology Industry Organization and drug wholesalers; • Exploring options for improving the drug shortage database for the internal 

tracking of shortages, as well as utilizing the database to develop prediction models 

for drug shortages; • Assessing commercial systems that could be contracted to provide ongoing or 

periodic data on sales and distribution of drugs at the wholesale level to detect early 

signals of potential shortages or supply disruptions; • Working with the Department of Justice, as directed in the Executive order, regarding issues related to price gouging and hoarding, including reports from pharmacists and other health care providers in connection with drug shortages; • Announcing a public meeting on proposed recommendations for establishing a 

generic drug user fee. The primary goal of this user fee program is to bring median 

time to approval from around 30 months to a primary review goal of 10 months. 

This will bring generics to market faster, which should help alleviate shortages. In 

addition, FDA will continue to prioritize review of generic applications for products 

that are in shortage situations. 

CONCLUSION

FDA and the Administration are committed to addressing the important issue of 

drug shortages. FDA is doing everything it can under its current administrative authority to help prevent and mitigate drug shortages. As noted previously, there has 

been a significant increase in the number of notifications as a result of the letters 

to manufacturers and the Executive order, which will continue to help mitigate a 

substantial number of drug shortages. It is our goal to continue a healthy and substantive dialogue with all interested stakeholders, both internally and externally, as 

we seek a solution to the problem of drug shortages. This is a challenge that we 

must work collaboratively to solve. FDA has taken a number of important steps and 

will continue to work with industry, providers and patients to address this issue. 

We also recognize the important role that you and other Members of Congress play, 

and we welcome the opportunity to discuss this important topic with you both today 

and moving forward. 

The CHAIRMAN. Thank you both very much. We’ll start a round 

of 5-minute questions. 

Dr. Glied, reading your testimony last night, what caught my eye 

was this paragraph. You said, 

‘‘It’s important to note that the low price responsiveness of 

demand for sterile injectable drugs also has implications for inventories and capacity decisions. If there is an excess supply 

of a particular drug, there may be no market for it, even at low 

prices.’’ 

And you say, 

‘‘The combination of limited ability to compel supply through 

failure-to-supply clauses or contractual breach provisions and 

low price responsiveness means that manufacturers face a 

symmetry of incentives. There is little cost of producing too little of one drug, but a potentially high cost of producing too 

much of that drug.’’ 

OK. How do you solve that conundrum? 

Ms. GLIED. It’s a challenging problem because I think one of the 

things we need to think about here is how—one of the things that 

we raise in the paper that we wrote is how to think about the private market responding to a lot of this change, because if we think 

about this sector, it’s really mostly a private market issue. The 
26 

group purchasing organizations are private, and the drug manufacturing firms are private also. 

So one of the things that the economists we spoke with suggested 

to us is that some of this could happen through the contracting 

processes that exist between the group purchasing organizations 

and the manufacturers, trying to essentially have the group purchasing organizations put more of a premium on having the supply 

in hand, not just getting the lowest price but making sure that the 

manufacturer really actually has that supply available. 

That’s something that’s got to work itself out in the market, because right now the real challenge is if you’re a manufacturer, you 

want to produce just the right amount for the market, and in the 

cases where there’s only a sole source manufacturer, that’s not 

such a complicated problem. You know what the market is, you can 

produce it. But when there are two or three different companies 

producing the same drug, and that’s typical for this generic kind 

of industry, you’re not only thinking about how much you produce, 

you also have to think about how much your competitors are likely 

to produce, and you can create real instability in the market as 

those things turn around. 

The CHAIRMAN. Then your report discusses how better ‘‘failure 

supply clauses’’ in these group GPO contracts could help mitigate 

the drug shortage crisis. Can you elaborate on that? 

Ms. GLIED. One of the things that we learned in talking to group 

purchasing organizations and manufacturers is that most group 

purchasing organization contracts do include a clause in them that 

says that if a manufacturer is unable to produce a drug that they 

were contracted to supply, they have to pay the difference between 

the cost of the drug at the price that they contracted for and the 

price at which somebody can buy the drug. 

Unfortunately, what happens is that when a drug goes into 

shortage and you can’t buy the drug at any price, those contracts 

become moot, they don’t hold any force anymore. So we thought 

that one of the things that might happen here is that private sector 

manufacturers might work with those contract terms to try and 

make them work so that even in the case of a supply shortage, you 

would push a little bit more of that responsibility to the manufacturers. 

The CHAIRMAN. Dr. Kweder, again looking at your testimony, one 

thing that caught my eye last night in reading this is that FDA 

does not have the statutory authority to require firms to continue 

production if they decide to stop, or require other firms to increase 

production in response to a shortage. Firms are statutorily required 

to provide FDA with notice of manufacturing discontinuations only 

in limited circumstances, and FDA lacks explicit authority to impose penalties on firms that do not submit required reports of 

discontinuations. 

How important an aspect to this shortage problem is that? 

Dr. KWEDER. We think it’s extremely important. The root of them 

from our window is—we don’t get into the finances—is when a 

company is having problems producing a quality product, they’re 

having trouble in a plant, they do not—until there is a crisis—they 

typically do not come to FDA and say we’re having a problem here, 

we need your help, we think we’re going to have a problem pro-
27 

ducing a product. It’s not our job to go to our competitors and ask 

them to ramp up production of a critical product, but we need some 

help. 

If we know about that, we can do that. 

The CHAIRMAN. My time is running out. One last thing. So if 

you’ve got two, three or four manufacturers and if they each supplied you with this information, then you would be able to tell 

whether or not we’re facing a shortage from one day to the other. 

Dr. KWEDER. That’s right. That’s exactly right. 

The CHAIRMAN. Thank you very much. 

Senator Enzi. 

Senator ENZI. Thank you, Mr. Chairman. 

Dr. Glied, the president of the Generic Drug Manufacturers Association, Mr. Ralph Neas, has told the committee that drug pricing 

issues are not the cause of the current drug shortages. Do you 

agree with Mr. Neas and the Generic Drug Manufacturers that 

pricing is not the cause of the current shortages? 

Ms. GLIED. Yes, sir. I agree. 

Senator ENZI. Thank you. 

Dr. Kweder, how many supplemental and new generic applications are in the current backlog that could help mitigate a shortage 

if they were approved? Is FDA prioritizing or expediting these applications for review? 

Dr. KWEDER. The answer to the second question is absolutely, 

yes. We do have a longstanding backlog of generic drug applications, but it’s important to look at what those applications are, and 

they can be for things like a new application, a new drug producer, 

they can be for a new source of an ingredient, or for a manufacturing change. 

We do monitor that queue and are well aware of the ones that— 

as we hear about potential drug shortages, we are constantly looking at that queue to pull things out that might expedite them in 

order to prevent a drug shortage, which is one of the reasons that 

early notification of a potential problem is so important. That’s exactly what we can do. 

Senator ENZI. Thank you. I’ve also heard about the amount of 

time that it takes for different stakeholders, ranging from 6 months 

to 3 to 4 years for approval. How long does it take to get FDA approval to a manufacturing facility change? Can you give some specific examples where the FDA has met the 6-month goal? 

Dr. KWEDER. A lot of that depends on the facility or where the 

facility is. In many cases, companies are coming to us seeking to 

change facilities, and it’s a facility that we know well. It’s moving 

to another plant. Those can be turned around very, very quickly. 

If it’s a facility in another country, for example, that we’re familiar 

with, we often have a great deal of information about that facility, 

or if we don’t, our international colleagues—who we have cooperative agreements with and understandings with—may have already 

inspected those facilities and be quite familiar with them, and 

share that information with us so that we can expedite action on 

that particular facility. 

There is a big difference in how we do business when we think 

there may be a critical product, a highly medically necessary prod-
28 

uct with a potential for supply, we can expedite those and meet 

those goals, and we do. 

Senator ENZI. Thank you. I was very impressed with your information about what’s happened since October 31, when the President did his Executive order, and I won’t ask you to provide it right 

now. If you can provide us with a list of the specific drug shortages 

that were prevented and how you did it, that might be helpful as 

we’re doing the legislation as well. 

Dr. KWEDER. We can do that. 

Senator ENZI. OK, thank you. And can you tell us how the Office 

of Generic Drugs coordinates with your office when evaluating applications for the manufacturing upgrades, active pharmaceutical 

ingredient approval, or drug applications? 

Dr. KWEDER. Our office and the Drug Shortages Program work 

very closely. In effect, we have key contacts and kind of a SWAT 

team approach that’s ongoing with the Office of Generic Drugs and 

our Office of Compliance, and the Office of New Drug Chemistry, 

all scientists who are involved in the actual review of the applications. So we coordinate very closely. We are in contact with them 

on a daily basis sharing information about what we’re hearing, 

what applications they have, the status of those applications, and 

also ongoing interactions with anyone such as our inspectors in the 

field who may be going into any of those plants and working with 

companies to address problems. It’s a daily contact. 

Senator ENZI. Thank you. I’ll yield the balance of my time. 

The CHAIRMAN. Thank you, Senator Enzi. 

I have an order of appearance here: Senator Kirk, Senators 

Franken, Merkley, Isakson, Bennet, Bingaman, Whitehouse, 

Blumenthal, Casey and Hatch. 

Senator Kirk. 

Senator KIRK. I thought your testimony was outstanding in describing the problem. Dr. Kweder, I asked Shauna to prepare me 

for this hearing. I wanted to drill into one patient and one therapy 

in which we were in shortage. It’s non-Hodgkin’s lymphoma, and 

the shortage of doxorubicin. And the story of the shortage for nonHodgkin’s lymphoma patients I think is instructive of the problem 

here. It’s supplied by three companies, and according to the briefing I got, doxorubicin shortage is due in part to one of the four 

companies that makes the drug, Teva Pharmaceuticals, was told 

earlier this year to stop manufacturing the drug by FDA. 

Meanwhile, demand for the drug has increased according to the 

American Society of Health System Pharmacists, and another supplier, according to ABC Bedford Laboratories, say they’re currently 

facing a manufacturing and capacity constraint. 

So we have, I think, problems that we can solve and problems 

that we can’t solve. If an individual private supplier is having difficulty or is deciding to get in or get out of business, I think it’s 

a nonstarter for the Congress to order a private concern to produce 

a pharmaceutical which it does not want to produce. We should not 

get into that game. 

But with regard to the Teva Pharmaceuticals question where the 

FDA is ordering them to stop and then triggering a shortage, I 

agree with Senator Blumenthal that the Klobuchar legislation is 

good, but I would argue to go one step further. I very much appre-
29 

ciate the work that your office has done, and I think you are a very 

effective advocate inside FDA, but I would like you to have increased powers. 

My hope is that this committee could consider something like 

providing the Center for Drug Evaluation and Research a new authority that I would call, for lack of a better term, a patient care 

balancing authority, so that if we find a shortage which, in your 

testimony, was very good. You say total supply of the clinically 

interchangeable version of an FDA-regulated drug is inadequate to 

meet the current or projected demand at the patient level, that you 

then have a patient care balancing authority to take action within 

FDA to remedy the situation within 6 months. 

And I would argue that we should then go further and say if you 

find that the drug is vital to the survival of a patient which, for 

example, in oncology that would be the case, that your patient care 

balancing authority would be able to remove FDA barriers to supply within 1 month, and I don’t think you would actually have to 

use this authority that much. 

But the fact that we have given you this authority would then 

give you so much greater weight inside the bureaucracy, because 

we make many decisions inside FDA to stop or halt or suspend, but 

if the decision is for patient death, we definitely need the Dr. 

Kweder operation, the CDER office to have greater authority, and 

I would call that a patient care balancing authority. But if you 

could comment? 

Dr. KWEDER. First I want to correct something. FDA did not tell 

Teva that they had to stop producing. 

Senator KIRK. Oh, OK. 

Dr. KWEDER. OK? And I think that’s important. We had been 

working with Teva for quite some time on really major quality production problems. This was not a new situation. This was ongoing. 

They ultimately made the decision that the only way that they 

could correct it was if they shut down, and I can’t comment on the 

specifics of whether that was entirely necessary. That’s not within 

my purview today. 

I think the problem that ultimately resulted because, as you 

said, there were other companies producing it, is really illustrative 

of Dr. Glied’s testimony and findings, that while there are other 

companies that produce it, they cannot—because of their production model, their 24/7 model—they cannot turn on a dime and 

ramp up production to meet a need when Teva makes a legitimate 

or not legitimate decision about what they need to do. 

I don’t think that additional FDA authority, as much as I welcome additional authority, would necessarily fix that problem. I am 

happy to tell you that Teva is coming back online in producing 

doxorubicin, if it’s not available already, and we recently approved 

yet another supplier. Pfizer, not typically a generic producer, has 

stepped in and started to produce that drug to help make up that 

shortfall. That will help hundreds of thousands of cancer patients. 

It’s a success story. 

Senator KIRK. If I could just finish up, I just hope, though, that 

in your testimony you said we have a growing shortage problem, 

which means for whatever reason, patients are being disadvantaged. 
30 

Dr. KWEDER. That’s right. 

Senator KIRK. And I’m particularly worried about their lives 

being lost. As Senator Franken said, if we switch from doxo to the 

other alternative, we just dropped the patient survival rate by twothirds, and I would like you to have greater authority inside FDA 

to make that argument. 

Dr. KWEDER. We’ll be happy to work with you on that. Thank 

you. 

Senator KIRK. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Kirk. 

I have to excuse myself from presiding. Senator Enzi will preside 

in my absence. 

And next is Senator Franken. 

Senator FRANKEN. Thank you, Mr. Chairman. 

I want to thank you both for your testimony. 

Dr. Kweder, in her written testimony, Dr. Glied said that 43 percent of all shortages were caused by quality problems at drug manufacturing facilities. I’ve also heard that when some manufacturers 

have compliance problems with the FDA’s good manufacturing 

practices, they take their product off the market rather than investing money to fix the problem. 

What could FDA do to help maintain the quality of drug lines 

while at the same time avoiding unnecessary shortages? And how 

often does FDA’s compliance office coordinate with the drug shortages office so as to make sure that their actions do not precipitate 

a shortage? 

Dr. KWEDER. Let me answer the last question first. We coordinate regularly with our Office of Compliance and our Office of Regulatory Affairs that is out in the field conducting inspections. In 

fact, we recently have changed our practice to require that before 

our district office people issue a letter or our Office of Compliance 

issues a warning letter, that they specifically address how any of 

the actions, any actions proposed might result in a drug shortage, 

take that into consideration. 

We do it already, but this sort of cements that process and 

assures it. 

The kinds of quality problems that are occurring in these plants, 

these are not people not crossing T’s and dotting I’s. The key to 

producing a quality product for particularly these injectable drugs 

is that they have to be produced under very tightly controlled circumstances. I don’t know how many of you have ever been in one 

of these plants. If you’re a woman, you’re not allowed to wear nail 

polish in the plant, something that would seem to be quite permanent, because there’s a risk that if it gets into the air or into the 

system, it could contaminate a product that would be injected into 

a cancer patient’s veins. So maintaining quality is really the company’s job. 

The standards are very straightforward. They are the same and 

have been, but modernized, current. They’ve been the same for a 

long time. And counter to what some would say, they are highly 

consistent across most Western nations. Our standards, the European Union standards, Australia, and Canada, are highly consistent and similar. 
31 

We do work with companies. The first time we do an inspection 

and find a problem, we monitor them. We go back. We check on 

their progress. We require that they report to us what they are 

doing to address it. Oftentimes when we go back in and re-inspect, 

we find that none of those things have been done. So we go back 

through this again. 

Most companies do an outstanding job. But there are some that 

don’t, and unfortunately some of the ones that are under the most 

production pressure are making the most drugs. These companies 

that are at the root of most of these shortages, Dr. Glied pointed 

out, make hundreds of products, hundreds. There is no cushion 

there for them to shut down a little bit to fix a problem or shut 

down temporarily. 

Senator FRANKEN. Dr. Glied, according to a report your office released in October, about half the shortages, at least until 2010, 

were for oral medicines like tablets and capsules, not for injectable 

drugs. But for 2010, 74 percent of shortages involved sterile 

injectable drugs like anesthetics and chemotherapies. 

What brought about the sudden shortage of generic injectable 

drugs? And several proposals to address this problem have included changes to the physician reimbursement for these drugs. 

Are we really going to solve this by changing how we pay for health 

providers for drugs in shortage? 

Ms. GLIED. Let me start with your second question, which is the 

easier one. As I think we pointed out, there’s a quite rigid disconnect between the price that health providers are paid, the fee 

that they’re paid to compensate for the cost of procuring drugs, and 

the price that manufacturers are paid by group purchasing organizations for those same drugs. In some cases, for example, when 

drugs are used under the Medicare Part A program, there’s actually no fee paid in direct compensation to the provider at all, but 

the price that a manufacturer gets is based on a negotiation between a group purchasing organization and that manufacturer that 

encompasses all the drugs the provider uses regardless of who the 

payer is, whether it’s private insurance or Medicare Part A or 

Medicare Part B. 

There’s a really rigid disconnect there, and that’s why I think we 

believe that changing the prices that are paid to health care providers would have no impact on the amount of money received by 

manufacturers in this sector. 

As to your first question, I think the problem is multifactorial, 

but one thing that we saw in the data that we looked at is that 

there has been a big increase in the volume and number of drugs 

available to generic manufacturers over this period, I think a very 

healthy increase that mainly came about because a lot of branded 

products went off patent. So the potential market for the generic 

manufacturers grew. At the same time the population is aging, and 

these sterile injectable drugs, that market is really growing very 

robustly. 

In the beginning, what that led these manufacturers to do is to 

increase their capacity utilization, and our hypothesis is that that 

increase in capacity utilization just led to more of the kinds of quality problems that Dr. Kweder has pointed out. Then you start having this cascading effect, because there are not that many manufac-
32 

turers, not that many plants in this business. Once one of them 

goes offline because they’re having a quality problem, it just cascades through the industry, and that’s why we anticipate that it 

won’t be until the new manufacturing capacity, which is in the 

works, really comes online that this problem is going to solve itself, 

and until then we really will need the FDA to keep managing it. 

Dr. KWEDER. And I would add that we are working with those 

companies right now, as they are making plans for their new 

plants and trying to build quality in. 

Senator FRANKEN. Thank you. 

Senator ENZI [presiding]. Senator Merkley, and then Senator 

Isakson. 

Senator MERKLEY. Thank you very much, Mr. Chair. 

I wanted to start simply by noting that the GAO report goes 

through a host of different strategies that FDA uses, eight different 

strategies, and that they fall largely into helping with manufacturing problems, helping with importation, and then flexibility in 

terms of allowing a drug to be marketed that maybe doesn’t have 

the right labeling or right quality. 

It just strikes me as fascinating that a for-profit company is running into a manufacturing problem and FDA is able to help them 

resolve that problem. I don’t quite understand. Can you explain to 

me how it is that these experts in manufacturing need your help 

to figure out how to solve a manufacturing problem? 

Dr. KWEDER. I think that’s a good question, and we struggle with 

that to some degree ourselves. One of the reasons that FDA can 

sometimes get involved is we see all of the companies. We see 

where they’ve been. We have a broader view of manufacturing 

processes than sometimes an individual company might. We also 

are able to work with them to help them identify new strategies 

because we’ve seen other companies use particular strategies. 

But as to the broader question about why they would come to 

FDA for advice, why they would need FDA’s advice in the first 

place, I’m not sure that I have an answer for that. What we can 

do, though, is that we can help them prioritize by taking into account things like products that we think may be medically necessary or highly critical for patient care, and help them prioritize 

potentially a panoply of problems that they’re trying to address at 

once. 

Senator MERKLEY. Let me move on. I’ll leave that as a bit of a 

mystery for now. 

But neither of you has really gotten into this question that we 

keep hearing about, about the gray market, about groups that are 

following the drug market well enough to realize there’s going to 

be a shortage and knowing that, basically corner the market on 

that drug, buy up the surpluses and accentuate the shortage, the 

scalping problem. And the fact that it hasn’t featured prominently 

in either of your testimony is interesting to me because it’s often 

put forward as part of why there’s been such a dramatic change 

over a 2-year period. 

Is drug scalping a significant part of this problem? 

Ms. GLIED. I think that what we would say is that the gray market is a symptom of the problem. I mean, it is a problem in itself, 

but it arises because of the underlying problem of shortages. If the 
33 

problem of shortages weren’t there, the gray market would not be 

able to exist and survive. Addressing the gray market is important 

because price gouging is a significant issue, but addressing the 

gray market by itself is, unfortunately, not going to solve the whole 

shortage problem. 

Dr. KWEDER. And I would add that we don’t actually have a lot 

of information about what’s called the gray market. We get reports 

from pharmacists or health care providers or health systems about 

experiences they’ve had and what kinds of prices that they’re paying, but this isn’t an area where FDA has any authority, and it’s 

one of the reasons that we are beginning to work with the Department of Justice, and we’ll also have to work with the Federal Trade 

Commission, to try and understand this a little better and see what 

we can do. 

From our standpoint at FDA, some of the gray market activities 

are a signal to us to be aware that there may be counterfeit products involved, another challenge that we have in this country. It’s 

a signal to us to begin to go into that zone and start to assess 

whether there may be counterfeit products at play. 

Senator MERKLEY. I’m running out of time, so I’ll just note that 

I want to explore this more, because just as we see with tickets for 

a sporting event, if there is a high demand and low supply, scalping is far more effective, but the scalping accentuates the problem. 

And the fact that neither of you has a firm grip on the role it’s 

playing says we really need to dig into this piece, because in many 

markets there’s a response. The response is it’s illegal to sell beyond the face value of the product. That can take the heart out of 

scalping overnight. I want to find out, is that something we need 

to do in this area? 

Thank you, Mr. Chair. 

Senator ENZI. Senator Isakson, and then Senator Bennet. 

Senator ISAKSON. Thank you, Mr. Chairman. 

Dr. Kweder, when you were responding to Senator Merkley’s 

question regarding a pharmaceutical company coming in to you 

seeking advice when they’ve got a manufacturing problem, wasn’t 

that the question? It would seem to me that would be logical. If I 

was producing a product and I was regulated by a government entity and I had competitors, I’d sure come to the Government rather 

than the competitor to give me advice, because all I’m doing is telling them I’ve got a problem. Am I right? 

Dr. KWEDER. I think so. 

Senator ISAKSON. And does the FDA try and be a problem solver 

when a manufacturer comes to them and give them recommendations that they might have missed otherwise? 

Dr. KWEDER. We consider our job to be problem solvers, and our 

job is to facilitate, help facilitate these companies being able to 

make a high-quality product. That is at the core of what we do. 

Senator ISAKSON. You said in your testimony that you prevented 

96 shortages I think this year or last year. 

Dr. KWEDER. Actually, that’s just since October 31. 

Senator ISAKSON. Please tell us. I want to followup on Mike’s 

question. How did you do that? That seems like why we’re having 

the hearing, so I’d like to hear that. 
34 

Dr. KWEDER. Yes. In a lot of those cases what we have done, is 

worked with manufacturers to help them get certified additional 

supplies of critical ingredients, to help them bring a new production line on board, to make changes in their manufacturing process, 

or to help solve quality problems, help them find creative approaches to quality problems. They may be thinking about an approach and aren’t sure about it. They’ll come to us, and we’ll have 

a conversation about what makes the most sense and what’s the 

most pragmatic. 

Other things that we have done to prevent these shortages are, 

we have gone to competitors of these firms and encouraged them 

to ramp up production, thereby putting more in place on the market so if a company having a problem feels like they have to go offline, there will be supply available. In some cases we have gone to 

sources that are outside this country to help find alternative supplies. 

Those are just some examples. In other cases where there have 

been problems, where the company may be having a systemic problem on multiple lines and we think that one production line could 

be protected with additional controls to ensure quality, we have 

helped them continue making a product while other things around 

it were not able to be made. 

Finally, we have done some very creative things where, in response to one shortage, one company ramped up production and 

found that the stress of increasing production was leading to them 

having precipitate in their injectable drug. You looked at it and it 

was cloudy. Well, we worked with them to figure out that if you 

just warmed the vials, the precipitate would dissolve. What they 

were able to do was label the drug with that, send it packaged 

tightly with instructions and notify hospital pharmacies that would 

be administering it that that was the way to do it, rather than 

have to not ship the product. 

Those are some examples. 

Senator ISAKSON. Dr. Glied, I’m not a doctor, I’m not a pharmacist, I’m not scientifically inclined, so I may say something stupid right here, but the growth in cancer drugs in particular, but a 

lot of drugs, are biologics. When you talk about a sterile injectable, 

is that talking about a biologic? 

Ms. GLIED. It could be a biologic. I don’t think most of these are 

biologics. 

Senator ISAKSON. Then my question—— 

Ms. GLIED. I’m not a doctor either, so I have to confess. 

Senator ISAKSON. OK, that makes two of us. With the growth of 

biologics, have the shortages become disproportionately biologicbased drugs, or chemical compound drugs? 

Dr. KWEDER. To date, the answer is no, but biologics do offer 

really special and challenging problems because there are not generic biologics, and they tend to be made by one company. Now, the 

good news about that is that companies guard their biologic production and monitor it very, very closely. But there is always the 

risk of unanticipated problems. 

We have had some of those. But the majority of the shortages, 

the vast majority, have been for nonbiologics or small-molecule 

drugs. 
35 

Senator ISAKSON. OK. Thank you, Mr. Chairman. 

Senator ENZI. Senator Bennet, and then Senator Bingaman if he 

returns. Otherwise, Senator Whitehouse. 

Senator BENNET. Thank you. Thank you very much, Senator 

Enzi. And thank you for your testimony, both of you. 

Dr. Kweder, as you know, our country does not have a nationwide drug distribution system to know where drugs are across the 

supply chain from manufacturers to patients, and as a result, when 

hospitals and pharmacies are approached by distributors who may 

actually have an additional supply of pharmaceutical drug that 

may be in shortage, the hospitals and pharmacies can’t always 

verify the legitimacy of that drug. And even in this time of fiscal 

constraint, that’s why I’m supportive of a drug distribution system 

that does—while it doesn’t create unduly burdensome costs for any 

part of the supply chain, it would provide us knowledge about 

where drugs are in the system, and I wondered whether you’d 

think it would be helpful for the FDA and other supply chain 

stakeholders to have information on the legitimacy and pedigree of 

a drug, particularly when a drug is in shortage. 

Dr. KWEDER. Yes. I think that it won’t solve a drug shortage 

problem, but it would allow hospitals, pharmacies, and the agency 

to have a better idea of whether a product is a legitimate product. 

I already mentioned that one of the concerns that we have about 

the gray market is whether some of these are actually signals of 

counterfeit, and that would make assessing that very much more 

straightforward. 

Senator BENNET. And it’s my point of view, I don’t know whether 

you would agree, but that there are a lot of reasons why we would 

want to be able to track pharmaceuticals across the country, but 

those reasons are particularly in stark relief when you think about 

the shortage issues. We’ll look forward to working with you on 

that. 

Dr. KWEDER. Thank you. 

Senator BENNET. I had a second question for you, as well. You 

mentioned in your testimony that FDA can use its regulatory discretion for temporary importation of nonFDA-approved versions of 

critical drugs when a shortage can’t be resolved immediately, and 

you’ve noted that there may be foreign suppliers—you were just 

talking about this with Senator Isakson—that possess or have access to a critical drug but are not FDA-approved and may need to 

be inspected. 

At an earlier hearing on the safety of our drug supply, GAO reported that at FDA’s current pace, all establishments abroad could 

be as long as 9 years from now. I wonder whether you think that 

FDA’s desire to better use third-party resources and to use inspection information from other top-tier countries to maximize resources will have a positive effect on reducing drug shortages. 

Dr. KWEDER. I think it already is having a positive effect on reducing drug shortages. We get a great deal of information from our 

regulatory counterparts in other countries, and they don’t necessarily obviate the need for us to do inspections. We will often 

subsequently go and do that. But they provide us a great deal of 

assurance when we are using regulatory discretion to allow temporary importation of a critical-need product. 
36 

We don’t do that lightly. We look very carefully at what we 

should know from other countries’ inspections about that particular 

product, and we haven’t used it—it’s not the first thing we try to 

do when we’re addressing a shortage, but it is an extremely important tool. 

Senator BENNET. Actually, while we’re on that topic, just out of 

curiosity, what do we know about drug shortages in other countries? 

Dr. KWEDER. This is not a uniquely U.S. problem. This is occurring in other countries as well, and they utilize many of the same 

tools that we do to try and resolve them. We have monthly teleconferences with some of our regulatory counterparts, particularly the 

EU, Australia and Canada, to share information about shortages, 

and we work together to try and identify alternate suppliers, other 

creative solutions. 

Senator BENNET. Are there differences in the categories of drugs 

that are in short supply in other places? 

Dr. KWEDER. I would say, in general, it varies a lot. Sometimes 

there is a lot of overlap. Sometimes there’s not much overlap at all. 

Categories, I would say they’re similar. Drugs that are hard to 

produce or that require specialized facilities to produce are much 

more vulnerable to this. 

Senator BENNET. Dr. Glied, do you have anything you’d like to 

add to that? 

Ms. GLIED. Different countries have responded that they have 

shortages in different areas. We essentially share a supply chain 

with Canada, so they tend to have shortages in exactly the same 

areas that we do. When you go to countries like Australia that are 

farther away, their markets are operating somewhat differently. 

But I would agree with Dr. Kweder, that some of these drugs, ones 

where it’s really hard to ramp up production because the facilities 

are specialized, are always going to be the ones most prone to 

shortages in every country. 

Senator BENNET. Thank you very much, both of you, for your 

work on all of this. And, Mr. Chairman, thank you for holding this 

hearing. 

Senator ENZI. Senator Whitehouse and then Senator Blumenthal. 

Senator WHITEHOUSE. Thank you, Chairman. 

We’ve spoken quite a lot about the gray market in the course of 

this hearing. Could either of you describe for me what the gray 

market looks like, or is there a report that is not in the record of 

these proceedings that has taken a look at what the gray market 

looks like and who is participating and what their motivations are? 

Ms. GLIED. We have not done a report on the gray market. I believe there is a report. I think the group purchasing organizations 

have put out a report on the gray market. I’m not absolutely sure. 

The gray market is a market that is buying drugs, often not directly from the manufacturers, often from suppliers, from providers 

who have extra capacity, we’ve been told. Some of these might be 

infusion clinics or somewhat—they’re not necessarily the hospitals 

and physicians who are participating in the typical GPO arrangements. It’s a very fragmented market. There are a lot of players in 

it, but I think we don’t know very much about it because it’s gray. 
37 

Senator WHITEHOUSE. For the record, doctor, I see your head 

nodding in agreement? 

Dr. KWEDER. Yes, my head is nodding in agreement. We don’t 

know a lot about it I think because, as Dr. Glied said, from the reports that we get, it does seem to be quite fragmented. For example, one of the ways that health care providers will learn about a 

product is they’ll receive a fax in their office from some source advertising availability of a drug that’s in shortage at an exorbitant 

price. In fact, I can tell you I did my fellowship training at Women 

and Infants Hospital, and some of my colleagues there have sent 

me some of these things that we have passed on. 

Senator WHITEHOUSE. The gray market could include something 

as benign as Women and Infants Hospital calling around to other 

hospitals and saying we’re short on this drug, do you have any to 

spare and would you sell it to us, which I think everybody in this 

room would think is a pretty benign form of trying to resolve the 

drug shortage issue. But it could also involve speculators who are— 

I see two heads nodding actively, just for the record—who are actively engaged in buying these products for the sake of hoarding 

them, selling them, and profiteering off of the shortage. 

Dr. KWEDER. Yes. It’s the profiteering that really raises red flags. 

It’s not unusual in a community for one hospital to be in short supply of a particular product—maybe they’ve just used more this 

month than last—and to seek availability from another local facility. That isn’t what we worry about. We worry about the latter. 

Senator WHITEHOUSE. And I suppose you could make a case that 

given these shortages, and given the fact that hospitals and providers can misjudge how much they’re going to need, there’s actually a healthy role for a broker to be in the middle of this and find 

a profitable niche as a market maker. 

On the other hand, if they’re sending unsolicited faxes and 

they’re seeking to charge a significant markup, it begins to look 

pretty sordid. What type of practices are you seeing out there at 

the worst end of the spectrum? 

Even anecdotally. 

Ms. GLIED. Just one of the things that I would also note is that 

one of the concerns in the gray market is that the quality of the 

goods, their pedigree, knowing what they actually are, is much 

harder to ascertain. So when these are purchased through traditional distribution channels, everybody has a good sense of what 

they’re getting. And I think another concern with the gray market 

is also just the quality concerns. I just want to note that. We 

haven’t heard reports of specific issues with the gray market. You 

might have heard more. 

Senator WHITEHOUSE. And in terms of price gouging, what 

anecdotally are you hearing as the worst case scenarios that are 

taking place? 

Dr. KWEDER. We have heard of 100-fold price increases. 

Senator WHITEHOUSE. Not 100 percent, 100-fold. 

Dr. KWEDER. One-hundred-fold price increases. 

Senator WHITEHOUSE. A $4 drug going for—— 

Dr. KWEDER. A $4 drug going for—— 

Senator WHITEHOUSE [continuing]. Four hundred dollars. 
38 

Dr. KWEDER [continuing]. Going for $400, or $4,000. I mean, 

those are the kinds of reports that we hear of, and I think those 

are the ones that stand out, and probably many of them aren’t 

quite to that extent. But those are the kinds of reports that many 

of your colleagues’ constituents have sent in letters to us. 

Senator WHITEHOUSE. I’ll close because my time is expiring. But 

it strikes me that the two considerations are related in that an entity that is willing to engage in that kind of gouging is probably 

not morally opposed to selling low-quality or phony product as well 

for that kind of a markup. 

I’ll yield back. Thank you, Mr. Chairman. 

Senator ENZI. Thank you. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman. And thank you 

both for your work and for your testimony today. I want to just 

take forward some of Senator Whitehouse’s questions. 

In fact, there has been a report very recently by Premier which 

showed that in a 2-week period, 2 weeks, beginning of this year, 

1,745 examples of gray market offers from 42 acute care hospitals, 

an average mark-up of 650 percent, and we’re talking here about 

drugs that are absolutely critical in oncology, in cardiology, in 

emergency rooms. These workhorse medicines are not luxuries. 

They are essential critical care medicine, and someone is profiting. 

It is more than a symptom. It is more than just a by-product. It 

is part and parcel of a market that isn’t working. 

Dr. Glied, you have said that there is a degree of concentration 

here that isn’t seen in many other markets. That is a very polite 

way of saying that there is no competition. We have had a discussion here for close to 2 hours, an hour-and-a-half, and the word 

‘‘competition’’ so far, at least so far as I’ve heard, has not been 

mentioned. There is no competition here, which leads to these gray 

markets. 

So my initial question to you is, how many findings in the 2 

months since the President’s order have been referred to the Department of Justice by the FDA? 

Dr. KWEDER. I will have to get back to you on that, on the specific number. 

Senator BLUMENTHAL. Do you know of any? 

Dr. KWEDER. Yes, I do. 

Senator BLUMENTHAL. How many do you know of? 

Dr. KWEDER. I know of at least two, but I think there are more, 

and I’ll have to get back to you on that. 

Senator BLUMENTHAL. I think that is very, very important, and 

as much detail as you could provide I would appreciate. 

Don’t you believe that some kind of overarching and intensive investigation is necessary here by either the FTC or the Department 

of Justice? 

Dr. KWEDER. Let me just add that price gouging isn’t something 

that would necessarily be reported to FDA. The information, the reports—the kinds of things that our Drug Shortage Program hears 

about is mostly hearing from companies, sometimes from health 

care providers or hospitalists. 

The specific report on the price they paid, that isn’t something 

they’d bring to our attention. 
39 

Senator BLUMENTHAL. I understand that you may not receive all 

of the reports, but the President’s order directs that you consult 

and— 

Dr. KWEDER. When we do, we do— 

Senator BLUMENTHAL. You do give that information to the Department of Justice. 

Dr. KWEDER. Yes. 

Senator BLUMENTHAL. That’s why I’m asking you. Don’t you 

think that there is a need for an investigation here by the FTC or 

the Department of Justice in light of these absolutely astonishing 

and appalling markups as part of the gray market? 

Dr. KWEDER. It’s not for me to decide who should do it, but I do 

think that we would like to understand this better. 

Senator BLUMENTHAL. Well, I would take that as a yes, unless 

you disagree. And I recognize—— 

Dr. KWEDER. You can take that as a yes. 

Senator BLUMENTHAL. Thank you. Do you know who is profiting? 

Dr. KWEDER. We do not know because we don’t understand the 

whole lay of the land. There are certainly—there is a system out 

there of legitimate wholesalers and distributors. Whether those are 

the same parties who are in the business anyway who are involved 

in this, or whether there are just sort of people coming in and out 

of the landscape, we just don’t know. 

Senator BLUMENTHAL. So it could be the manufacturers? 

Dr. KWEDER. I guess it could be, but we don’t have any reason 

to think that it is. 

Senator BLUMENTHAL. And it could be the wholesalers or distributors? 

Dr. KWEDER. That’s right. We just— 

Senator BLUMENTHAL. And it could be the hospitals. 

Dr. KWEDER. We just don’t know. 

Senator BLUMENTHAL. So there really is a need for some kind of 

fact-finding here on a broader basis than just an individual finding 

of a particular drug being in shortage. 

Dr. KWEDER. Yes, and we understand—I mean, one of the reasons it’s called—it’s not black or white, it’s gray. It’s also gray, as 

Dr. Glied said, because we don’t understand it very well. And so 

having a really clear picture of how this operates, who is involved, 

and what the factors are that are motivating it and rewarding it 

would be very helpful. 

Senator BLUMENTHAL. I am almost out of time, but I just want 

to suggest, and you should feel free to disagree, that at the very 

minimum there ought to be a ban on any secondary sales—that is, 

sales after the initial purchase—at a price higher than that initial 

purchase of these kinds of drugs, which would be a remedy against 

this kind of hoarding and profiteering and gray market. In other 

words, a hospital or a wholesaler or anyone that purchases the 

drug should not be permitted to sell it at a higher price than it was 

originally purchased. That’s the basic concept. I recognize there 

will be a lot of elaboration on it, but I’d just open it for your comment, if you have any. 

Ms. GLIED. I think it’s something that we should definitely take 

under consideration and talk to the folks at the DOJ and FTC 

about how that might work. 
40 

Senator BLUMENTHAL. Thank you, Mr. Chairman. 

The CHAIRMAN [resuming the chair]. Senator Casey is next. 

Senator Casey. 

STATEMENT OF SENATOR CASEY

Senator CASEY. Mr. Chairman, thank you very much. I appreciate you having this hearing, and I appreciate the work you’ve 

done, and the Ranking Member, and so many others on both sides 

of the aisle at a time when we have a lot of news stories, many 

of them based upon the reality of Washington about how Democrats and Republicans don’t work together. This is one issue where 

you’ve had I think a broad consensus, and not just for purposes of 

a hearing but over many, many months now to come together, and 

I’ve been so honored to work with people in both parties, working 

on the original legislation that Senator Klobuchar and I introduced, 

and I know I missed her presentation today, so I’m first of all 

apologizing for that. I’ve been in and out of the hearing. 

I want to thank our witnesses. The gravity of this is hard, really 

hard to fully comprehend or fully articulate because this is so immediate and so grave for families. I would like to recite a story, 

and I’ll abbreviate this, but it’s the story of Sarah Batalka. She’s 

a 29-year-old woman from Pennsylvania, and here’s what she wrote 

to me, and I’m reading in part. 

She said, 

‘‘In April of this year, I got the worst possible news. There’s 

a drug shortage crisis nationwide. I was told by my home infusion company that their supply of magnesium sulfate, a key ingredient in my IV bags, and one without which I cannot survive, was dwindling, and that they had only enough to fill the 

IV bags for a few more weeks.’’ 

She goes on to say, 

‘‘To give you some idea of the impact of this news on me, 

please consider what it would feel like to you if someone told you 

that there would be only enough air supply left for 3 weeks of 

breathing.’’ 

That gives you a sense of the intensity and proximity of the 

threat that people feel. 

I also will note, and I’ll introduce Dr. Maris later for the next 

panel, but a lot of his testimony, working as he does so well at 

Children’s Hospital in Philadelphia, is about the impact on children, children with leukemia, and all of the horrors and nightmares those children live through and their families. 

This is about as urgent as it gets for work that we’re supposed 

to be doing in Washington. 

Let me just try, in the remaining time I have, to just get to a 

couple of questions. 

Dr. Glied, and I know you’re speaking from the vantage point of 

Health and Human Services, I want to ask you, in your testimony 

you said that many—and I’m paraphrasing here—but many of the 

current supply problems will be alleviated when new capacity 

comes online. I know you may have addressed this more than once, 

but I want to make sure that I understand. 
41 

How do you arrive at that assessment? I didn’t read your exact 

words, but how do you arrive at that assessment that you think 

this will be alleviated when new capacity comes online? 

Ms. GLIED. When we spoke to the generic manufacturers, and 

also just read news reports and looked at information from the 

FDA, we learned that several of the manufacturers are planning to 

build or are already building new manufacturing capacity and upgrading their existing capacity. Our analysis suggested that the big 

problem here is that the existing capacity is just not enough to 

really be able to manage, to produce the amount of drugs that 

there’s now a demand for with a sort of sufficient cushion to be 

able to deal with quality problems that may come up or changes 

in other manufacturers’ production lines and other things like that. 

We really need to have that extra capacity come on before we can 

really solve this problem. We can manage it until then, but it isn’t 

going to go away by itself until that extra capacity is there. 

Senator CASEY. OK. What a lot of us are worried about, including 

you and everyone here, is that there may not be an alignment between that capacity coming online and the urgency of the problem 

when you have only weeks within which to solve a shortage problem. 

Let me just ask it this way. Tell us whether it’s responding to 

us or responding to Sarah, whom I just quoted a moment ago, or 

anyone else, tell us what are the things we’ve got to do in the next 

couple of weeks or months to address this problem. 

Ms. GLIED. What we have to do in the short run is really help 

FDA try and manage the situation we’re in right now, which is one 

of limited capacity and big demand. We can’t produce more. What 

we have to do is align what we’re producing better with the need, 

and that’s what we have to do in the short run. 

Senator CASEY. Dr. Kweder, did you have something to add to 

that? 

Dr. KWEDER. I think what we need to do is get companies who 

are experiencing production problems to engage with us early and 

not wait until they have a critical situation. We have learned by 

doing this for years now that it may not address 100 percent of 

these circumstances, but boy, does it help us mitigate them and 

prevent them. Preventing shortages is absolutely what we should 

be looking at. 

Senator CASEY. Thank you. 

[The prepared statement of Senator Casey follows:] 

PREPARED STATEMENT OF SENATOR CASEY

Mr. Chairman, I would like to thank you and Ranking Member 

Enzi for convening this hearing today. The unprecedented growth 

in prescription drug shortages is among the most pressing and serious issues confronting the American health system. It is unacceptable that we are unable to help seriously ill patients not because 

we don’t know how, but because we don’t have enough of a product 

that we know saves lives to go around. How can this be happening 

in our country? We cannot allow this to happen on our watch. 

This is a problem that was brought to my attention in the fall 

of 2011 by a hospital in Pennsylvania: Lancaster General. Since 

that time, I have heard from more than 50 hospitals and phar-
42 

macists in the State about how the drug shortage crisis is affecting 

their ability to provide care. I am glad that we have a witness here 

today, Dr. John Maris from the Children’s Hospital of Philadelphia, 

to talk about how this issue has impacted children, who are among 

our most vulnerable. 

I have also heard from individual patients themselves, about how 

this crisis is affecting their health and—quite literally—their lives. 

I would like to share a story that I received from a constituent, 

which describes the severity of these shortages and how urgently 

we must work to address these issues. 

Sarah Batalka, a 29-year-old woman from Quakertown, was born 

with a mitochondrial disease. For 6 years now, she’s needed help 

maintaining her blood levels of critical electrolytes, including magnesium and potassium. In addition to receiving them in pill form, 

she gets them through IV’s that provide enormous doses of magnesium and potassium daily. These intravenous medications keep her 

alive. She cannot survive without them. 

Now I would like to read from a letter she wrote to me, so you 

can hear her own words. She writes: 

‘‘In April of this year, I got the worst possible news: there 

is a drug shortage crisis nationwide. I was told by my home 

infusion company that their supply of IV magnesium sulfate, 

a key ingredient in my IV bags and one without which I cannot 

survive, was dwindling and that they only had enough to fill 

my IV bags for a few more weeks. To give you some idea of 

the impact this news had on me, please consider what it would 

feel like to you if someone told you that there would only be 

enough air supply left for you for 3 weeks of breathing. I so depend on this medication for survival that its unavailability 

would indeed be the same as you having your air supply cutoff. 

My home infusion company explained to me the reasons for 

the shortage. They told me that the FDA had to shut down 

plants that manufacture IV magnesium sulfate due to quality 

control issues: visible particulate matter had been found in 

what is supposed to be a sterile, injectable drug. I was also told 

that this has created a nationwide shortage, affecting individuals like myself who depend on IV nutrition and/or electrolytes 

. . . cancer patients, expectant mothers . . . , dialysis and kidney transplant patients, and others. IV Magnesium sulfate is, 

especially in cases such as mine, a life-sustaining drug needed 

by many different kinds of patients with many different medical conditions. There is no substitute for IV magnesium sulfate 

for us, just as there is no substitute for oxygen, and you can’t 

survive without it. I was shocked to learn that it was even possible for there to be a shortage of such a drug in our country. 

From what I understand, this is only one example of one drug 

on a list of hundreds of life-sustaining medications that are 

currently unavailable.’’ 

With little than 2 weeks supply left of her medication, twice this 

year Sarah has had to reach out to our office for help in finding 

her medication. Fortunately, in Sarah’s case, her home infusion 

company was, at the last minute both times, able to purchase 

enough IV magnesium sulfate to keep her alive for the time being. 
43 

But what will happen tomorrow? That is the question that is before us today and I pray that we can find a way to ensure that we 

move beyond this crisis. 

Chairman Harkin, I know our staffs have been working with others in the bipartisan work group deliberatively on this issue for 

many months now, and are working on recommendations for how 

the HELP Committee can help solve this crisis. I hope that we can 

find a way to move forward on the legislation—S. 296, the Preserving Access to Lifesavings Medicines Act—that Senator Klobuchar and I introduced earlier this year, as I believe having an 

early warning system in place is fundamental to addressing these 

issues. 

I have spoken with others of you on the committee, including 

Senator Blumenthal, about this crisis and I know that many of you 

share this same commitment to moving this legislation forward, 

and identifying additional solutions to advance rapidly through the 

FDA reauthorization or otherwise. 

I look forward to working with you, and learning more from our 

witnesses today. 

The CHAIRMAN. Thank you, Senator Casey. 

Senator Hatch. 

STATEMENT OF SENATOR HATCH

Senator HATCH. Thank you, Mr. Chairman. 

Welcome to both of you. We appreciate the work you do and appreciate you being here. 

As I’ve been reviewing this, there are a number of reasons for 

these shortages that have been given. For instance, manufacturers 

have asserted that current shortages are principally due to manufacturing capacity being temporarily restricted, primarily due to 

FDA regulatory actions. Doctors, hospitals, and some patients have 

suggested that the problem is due to economic factors, focusing on 

the adequacy of payment rates for the products. And, of course, 

government-mandated rebates have lowered the payment levels for 

these products to a point where they say they’re no longer cost effective for manufacturers to produce them, or at least make investments in updating manufacturing capacity to comply with current 

FDA supply requirements. Others say that the FDA has asserted 

that the problem principally lies with a recent increase in the number of generic drugs that has exceeded existing manufacturing capacity. 

Now, some outside experts point to the FDA’s recent actions to 

review unapproved drugs, that were on the market prior to the current regulatory requirements, as being contributors to the shortage 

problem as well. I might say some analysts and stakeholders have 

blamed wholesalers for contributing to the shortage problem by 

rapidly increasing prices when drugs are in short supply, and I’m 

sure there are other arguments that are made as well. 

It’s a complex set of problems. 

Let me just ask you this, Dr. Kweder. The agency announced 

yesterday an interim final rule that will expand to the current definition of sole manufacturers to increase the number of manufacturers that are required to notify FDA about a discontinuation of prod-
44 

uct. Now, does the Executive order issued by the President and the 

interim final rule published by the agency, does that negate congressional action to address shortages, or is more required to mitigate current and future shortages? 

Dr. KWEDER. Senator, the interim final rule really only clarifies 

and expands what we have as existing authority. That is very, very 

narrow. It really speaks to notifying FDA of a disruption or discontinuance of any type of a product where a company is the sole 

supplier of that product. The majority of shortages and potential 

shortages that we are trying to cope with don’t fall into that category. So it really is not the sole answer. We think this will help, 

but it is not the sole answer. We can’t do this on our own. 

Senator HATCH. OK. Let me just say it’s apparent that we have 

to do something here. The question is what. I listened to Senator 

Blumenthal’s suggestion. It seems to me that would take away the 

desire to even be in the drug delivery business, and it would certainly put even more fiscal controls. 

On the other hand, we’ve got to do something to maybe make 

sure that these drugs—for instance, it’s said that 80 percent of the 

shortage really is in the area of sterile injectables, and these are 

really important for people with very serious maladies. And part of 

the problem, they claim, is the reduction in price for these products, and I’m not sure that’s a good argument. But I’d like to get 

your opinion on that, if either one of you can comment. 

Ms. GLIED. I think our analysis suggests that it’s not a problem 

of a reduction in price, that prices are actually rising for those 

drugs that are in shortage, and that prices paid to manufacturers, 

that’s really not been a source of this problem. We look at information from the manufacturers, as well as from public sources, and 

those sources seem to suggest that these manufacturers see a robust market ahead of them and that price is not the issue. 

Senator HATCH. Let me just ask one other question. For example, 

irinotecan, lost patent protection in February 2008, as I understand 

it. At that time, nine generic competitors were competing in the 

market. The Federal reimbursement in Medicare in the second 

quarter of 2008 was $126.24 per dose. 

Today there are only three manufacturers left in the market, 

down from a high of 15 manufacturers. Reimbursement by Medicaid is now $4.66 per dose. How can we increase the manufacturers in the market when we’ve reduced the reimbursement over 90 

percent? And I understand the desire to reduce the reimbursement 

cost, but it seems kind of ridiculous to me. 

Ms. GLIED. I just want to point out that that reimbursement cost, 

whatever it may be, is not the price that’s paid to the manufacturers. That’s a reimbursement that’s paid to providers and hospitals, 

but they get their drugs through contracts that group purchasing 

organizations negotiate with manufacturers, and those contracts 

have only one price in them, regardless of who the payer at the end 

is. The fact that the price is changing, the fact that the price at 

the hospital or provider is changing is really disconnected from the 

price received by the manufacturers. 

I would point out that the other thing to note is that when a 

drug moves from branded to generic, it takes a while until the information that Medicaid and Medicare get on prices adjusts. We 
45 

know that when prices move from branded to generic, their price 

falls a lot, and that’s because of the patent expiration. That would 

not be reflected contemporaneously. So the price, that high price 

that you’re seeing is the price that still reflects when the drug was 

on brand, not the price that existed when the drug went off patent. 

A big piece of that, a big chunk of the reductions in prices is the 

fact that patent expirations are happening and drugs are moving 

from the branded to the generic market. 

Senator HATCH. What is the price on that for the manufacturer 

today? 

Ms. GLIED. I couldn’t tell you, and I’m not even sure that that 

would be publicly available knowledge. Those are private contracts. 

Senator HATCH. All right. Maybe that’s not the way we should 

look at it, then. 

My time is up, Mr. Chairman. I didn’t mean to go over. 

The CHAIRMAN. That’s fine. Thank you, Senator Hatch. 

Senator Hagan. 

STATEMENT OF SENATOR HAGAN

Senator HAGAN. Thank you, Mr. Chairman, and thank you and 

Ranking Member Enzi for holding this hearing today. 

I’m concerned, obviously, about this issue, and I’ve got a particularly heart-wrenching story I wanted to share, Mr. Chairman. 

A woman, Ms. Sheets, had recurrent breast cancer, and she lived 

in the Winston-Salem area of North Carolina. The second time her 

breast cancer returned, it also affected her liver. And she was on 

doxo, and her doctor said that when a patient is being treated for 

metastatic breast cancer and is improving or stable, they continue 

the same therapy until they progress, which for first-line therapy 

could be a year. And when doxo became in short supply, her doctor 

waited to see if it would become available rather than switching 

her course of treatment. 

But after 1 month, this woman had to be started on another type 

of treatment, and for her, a less-effective drug, and sadly, her 

breast cancer metastasized to her brain very soon after the initiation of that regimen, and then she died within 3 weeks of that diagnosis. This is obviously a very tragic story, and we continually 

hear from cancer patients like this across the State. And so I’m 

looking forward to seeing what we can do about this issue. 

Dr. Kweder, I’m very concerned about the drug shortages that 

are currently affecting the way we treat patients in our country, 

just like Ms. Sheets. And the President’s recent Executive order directed the FDA to expedite its regulatory reviews, including reviews of new drug suppliers, manufacturing sites, and manufacturing changes whenever it determines that expedited review 

would help to avoid or mitigate existing or potential drug shortages. 

However, I am aware that applications for generic injectable 

drugs currently on the drug shortage list have been pending with 

the agency for more than 21⁄2 years. 

What is FDA doing currently to expedite review of applications 

for drugs that are currently on the drug shortage list? 

Dr. KWEDER. Senator, we are absolutely expediting those. What 

we do is when we see a potential drug shortage—we don’t wait 
46 

until there’s a shortage. When we have information about a circumstance in a company that might lead to a drug shortage, we 

look at our queue, which is long, of generic applications for all 

kinds of things, and we go in and we try to find any application 

that we might expedite that might address that particular circumstance. 

Sometimes the companies come to us and they tell us, ‘‘You 

know, I’ve had this application pending. It wasn’t critical before, 

but it appears that it is now.’’ And we will go right in and pull it 

out of the queue and address it and can turn things around in a 

matter of weeks to months and get it done. 

Senator HAGAN. I’ve specifically heard from a company that is on 

the list for 21⁄2 years for this generic injectable. 

Dr. KWEDER. And that may well be the case, but they may be one 

of five producers of a generic injectable and not one that we would 

necessarily see as a high priority to pull out. 

Senator HAGAN. But the drug is on the drug shortage list. 

Dr. KWEDER. The drug is on the drug shortage list? If it is on 

our list of potential drug shortages, problems that might lead to 

shortage, we would pull that. And if there is a company that’s in 

that circumstance and we’ve missed it, we need to know about that. 

Senator HAGAN. OK. We will definitely get back to you on that 

one. 

Dr. Kweder, how has the FDA prioritized addressing the drug 

shortage problem as part of its agency’s goals? And what do we 

need to do, what does the FDA need to do in order to make this 

a priority? For example, more authorities? More resources? Et 

cetera. 

Dr. KWEDER. We have done a great deal since the Executive 

order came out at the end of October. We’ve doubled, more than 

doubled the size of our Drug Shortage Program that does all the 

coordinating related to this. I’m happy to say we have— 

Senator HAGAN. You have more than doubled— 

Dr. KWEDER. The size. As of October 31, we had about four-anda-half people on it. We now have eight and are expecting three 

more in January coming on board, I’m happy to say. A number of 

commissioned officers are joining this program. The Administration 

also has announced its support for the bipartisan legislation, some 

of which we heard about from Senator Klobuchar this morning, 

that would give us more authority to require companies to notify 

us early if they have any problem with manufacturing or otherwise 

that could result in a drug shortage. That is where we can make 

a difference. 

In the long run, Dr. Glied is right, better production facilities 

that are more reliable and can produce high-quality products consistently is what will really address the big picture. But in the interim, FDA knowing about these potential situations, companies 

coming to us allows us to work with them, prioritize the work in 

a way that allows us to intervene and prevent the shortage in the 

first place. 

Senator HAGAN. How many manufacturers have actually come 

forward to notify you of coming shortages? 

Dr. KWEDER. We have had, since October 31 and the Executive 

order and our other activities, we have had 61 notifications mostly 
47 

from companies, some from hospitals and other things, but 61. The 

important thing is that that’s over the course of about a month to 

6 weeks. Our usual rate is about 10 notifications per month. And 

we know that companies have been reluctant to come to us. They 

don’t want to draw attention to themselves. But we are seeing a 

real move in the industry. The Generic Drug Manufacturing Organization is helping get the word out. We’re trying to work together 

to solve these problems before they occur. 

Senator HAGAN. Thank you, Mr. Chairman, and we will definitely be following up with you. Thank you. 

Dr. KWEDER. Thank you. 

The CHAIRMAN. Thank you, Senator Hagan. 

Senator Mikulski. 

STATEMENT OF SENATOR MIKULSKI

Senator MIKULSKI. Mr. Chairman, I know the hour is late. This 

has been a very needed conversation and I look forward to reviewing the testimony. I suggest we move to the next panel. I ask that 

my opening statement be included in the record. 

There is such compelling interest in this issue in Maryland from 

iconic institutions like Hopkins and the University of Maryland, 

both research and clinical practice, and to all those wonderful doctors that just want to make sure their patients have what they 

need when they need it. 

So let’s move on with the panel and move on with an action plan. 

[The prepared statement of Senator Mikulski follows:] 

PREPARED STATEMENT OF SENATOR MIKULSKI

Thank you Chairman Harkin and Ranking Member Enzi for having today’s hearing on prescription drug shortages. This is a local, 

State and national problem that, unfortunately, affects all of us. 

I am glad to be a member of the bipartisan Drug Shortage Working Group, where our job is to ensure that we have the right legislative framework with the right enforcement teeth in place to ensure that our Nation’s patients and health care providers are able 

to access the prescription drugs they depend upon. 

I have heard from Maryland hospitals, doctors, nurses and patients that drug shortages are a serious problem with serious consequences. 

Maryland hospitals are seeing shortages of over 100 drugs. These 

shortages affect patient safety and patient care. There are poor patient outcomes due to delayed treatment. Doctors and nurses are 

forced to use drugs that they aren’t familiar with, which can lead 

to medical errors. 

Maryland hospitals—being the innovators they always are—have 

implemented some regional solutions to manage the problem. The 

University of Maryland and Johns Hopkins University are working 

with the Veterans Administration to open up their pharmacies to 

each other to manage shortages and minimize harm to patients. 

Like many complex issues, our Nation’s drug shortage problem 

has many root causes. 

There is poor product quality. Manufacturers can’t—or aren’t— 

complying with Food and Drug Administration (FDA) good manu-
48 

facturing practices. The FDA has more advanced science and testing capabilities and are catching more quality problems than in the 

past. 

Manufacturers can’t access raw materials. 

Business and market forces are affecting drug availability. Manufacturers close plants when problems arise and stop producing 

drugs that aren’t profitable. Some drug companies have expanded 

the number of products they manufacture without a corresponding 

expansion in production capacity. 

Wholesalers and health care providers aren’t maintaining a large 

inventory of drugs to carry them through a supply disruption. 

The FDA lacks authority to require notification from manufacturers when a plant shuts down, which could lead to a drug shortage. 

Patients and hospitals are then caught off-guard and get little or 

no notice that a shortage is imminent. This leaves hospitals and 

patients with no time to prepare and leaves the FDA with no time 

to find a solution, such as working with another manufacturer to 

increase production of the drug in shortage. 

Bad actors in ‘‘grey markets’’ are selling fake, expired or illegally 

imported prescriptions. Some are hording drugs and hiking up the 

prices—exacerbating the problem. 

President Obama issued an Executive order on October 31 to immediately take action to reduce shortages; but we can and must do 

more. 

I have heard from stakeholders about potential solutions including: penalties for price gouging; requiring manufacturers to give 

notice when there is a manufacturing issue that could cause a 

shortage, which is what Senator Klobuchar’s bill would do; improve 

coordination and consultation among FDA review, inspection and 

compliance staff to get more manufacturers to enter the market 

and get manufacturing lines re-inspected and running again in 

order to reduce the likelihood of shortages. 

I look forward to hearing from the witnesses about their recommendations and will fight to include the best solutions in the 

Prescription Drug User Fee Act. 

The CHAIRMAN. OK. Thank you very much, Senator Mikulski. 

I thank the panel. You’ve been very, very excellent witnesses. 

Thank you very much for your work and for being here. 

Now we’ll call our next panel, Dr. Marcia Crosse, Mr. Murray 

Aitken, and Mr. Ralph Neas. 

Dr. Marcia Crosse, Director of Health Care for the Government 

Accountability Office. Dr. Crosse has been at GAO since 1983, has 

extensive experience evaluating areas such as biomedical research, 

medical product safety, and pharmaceutical regulations. Most recently she led the team that issued today’s GAO report on drug 

shortages. 

Murray Aitken is executive director of the IMS Institute for 

Health Care Informatics. In this position, Mr. Aitken collaborates 

with other experts in the public and private sectors to provide information services and analytics for the health care industry. He 

led the team at IMS that published a report in November entitled 

‘‘Drug Shortages: A Close Look at Products, Suppliers, and Volume 

Volatility.’’ 
49 

Next we have Mr. Ralph Neas, president and chief executive officer of the Generic Pharmaceutical Association. Mr. Neas has spent 

his career focusing on civil rights and health issues, having previously served as the executive director of the Leadership Conference on Civil Rights, and most recently as the CEO of the National Coalition on Health Care. 

We thank all of you for being here. 

I’m going to yield to Senator Casey for purposes of introducing 

our final witness, Dr. Maris. 

Senator CASEY. Thank you, Mr. Chairman. 

Dr. Maris, welcome. Welcome to the whole panel. I haven’t had 

a chance to personally say hello to Dr. Maris today because I can’t 

reach that far, but we’ll say hello after the hearing. 

Dr. Maris is chief of the Division of Oncology at Children’s Hospital of Philadelphia and the director of the Center for Childhood 

Cancer Research. He’s also the director of the Pediatric Oncology 

Program at the Abramson Cancer Center at the University of 

Pennsylvania. He’s nationally and internationally recognized for 

his work in translating research about childhood cancers from the 

labs to the patients. His team at Children’s Hospital has been able 

to identify the main genes associated with neuroblastoma, a cancer 

that can be extremely aggressive. In the quest for a cure, they have 

moved some of these discoveries toward new therapies, a number 

of which are now in clinical trials. 

Dr. Maris, we’re grateful for your work, and thank you for being 

here today with us. 

The CHAIRMAN. Thank you very much, and thank you all for 

being here. Your statements will be made a part of the record in 

their entirety. We’ll go from left to right. If you could limit your 

opening statements to 5 minutes, we’d certainly appreciate that. 

Dr. Crosse, welcome and please proceed. 

STATEMENT OF MARCIA G. CROSSE, Ph.D., DIRECTOR, HEALTH 

CARE, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC 

Ms. CROSSE. Thank you, Mr. Chairman. Mr. Chairman and members of the committee, I’m pleased to be here today as you examine 

prescription drug shortages. As you stated, Mr. Chairman, today 

you’re releasing GAO’s report on FDA’s handling of drug shortages 

prepared in response to a request from you, Senator Casey, and 

Senator Blumenthal. I will discuss some of our findings from that 

report. 

As we’ve heard, the number of drug shortages has grown substantially, more than tripling in the last 5 years, and drug shortages are currently at record levels. Over half of the critical shortages involve generic injectable drugs with certain therapeutic classes such as anesthetic, oncology, and anti-infective drugs among 

those most often in short supply. Our review of specific shortages 

shows that the majority were caused by manufacturing problems 

which are particularly likely to occur with sterile injectable drugs. 

My remarks today will focus specifically on what FDA can and 

cannot do to respond to drug shortages, and how the agency has 

responded when drug shortages have occurred. We’ve heard from 
50 

FDA about some of the things that they can do, and I’ll come back 

to that. But what is it that FDA cannot do? 

FDA cannot require manufacturers to report actual or potential 

shortages to the agency or the public, or require manufacturers to 

take certain actions to prevent, alleviate, or resolve shortages. FDA 

cannot force manufacturers to make a drug or to increase the production of a drug that’s in short supply. It cannot control the distribution of drugs. It cannot prevent drugs from being sold into the 

gray market, and it cannot control prices. These distribution concerns have frequently been highlighted in recent discussions of 

shortages, and hospitals are being offered gray market drugs to fill 

shortages at prices sometimes hundreds of times above normal. 

What is it that FDA can do? Because FDA usually doesn’t know 

about a shortage until it is well under way, the agency’s approach 

to managing drug shortages is predominantly reactive. As FDA testified, the agency takes multiple steps to respond to drug shortages 

such as providing assistance to manufacturers to resolve quality 

problems. 

In addition, FDA encourages other manufacturers to increase 

production. It allows some products to continue to be marketed despite labeling or quality problems, and it has occasionally permitted the import of foreign versions of drugs. 

FDA may also expedite its review of relevant drug applications. 

The agency currently has a backlog of over 8,000 generic drug applications and told us that to try to address shortages, it expedited 

the review of hundreds of applications. But FDA was unable to tell 

us whether any of the expedited reviews were completed in time 

to help resolve a shortage. 

Of particular importance, when FDA is informed of the possibility of a shortage in advance, the agency has increasingly been 

able to prevent potential drug shortages from occurring. By taking 

the same kinds of actions the agency uses to respond to a shortage, 

FDA has prevented shortages of the majority of drugs where the 

agency learned of potential supply disruptions in advance. 

Beyond this, however, there are some things that the agency has 

not been doing. FDA’s ability to protect public health has been limited by management challenges that weaken its ability to respond 

to drug shortages. Most importantly, FDA has not systematically 

maintained data on drug shortages. Without such data, the agency 

has been unable to monitor trends and enhance its ability to address the causes of drug shortages. 

Many of these drugs have repeatedly been in short supply over 

the last decade, but FDA has not been performing routine analyses 

to understand patterns or examine root causes. Without a systematic method to store, track, and share data on drug shortages, the 

agency cannot ensure that it responds to potential and current 

shortages in a timely and coordinated manner. 

In addition, FDA has consistently staffed its Drug Shortage Program with a small number of employees. Even while the number 

of drug shortages tripled, just three staff were handling this work, 

and FDA only recently moved to add resources to this program. 

Finally, while the agency identified drug availability as a strategic objective to protect public health, this objective was focused 

solely on processes to bring new drugs to market. The agency had 
51 

no strategic focus on maintaining the supply of drugs already on 

the market. 

In closing, in our report we made several recommendations to 

FDA to strengthen its ability to respond to drug shortages, including assessing the resources allocated to the Drug Shortage Program 

and developing an information system on shortages. The agency 

has outlined actions it plans to take that are consistent with our 

recommendations. 

Our report also includes a matter for congressional consideration. 

We believe that Congress should consider establishing a requirement for manufacturers to report to FDA any changes that could 

affect the supply of their drugs. 

Mr. Chairman, this concludes my prepared remarks. I’d be happy 

to answer any questions that you or other members of the committee may have. 

[The prepared statement of Ms. Crosse follows:] 

PREPARED STATEMENT OF MARCIA G. CROSSE, PH.D. 

SUMMARY

WHY GAO DID THIS STUDY

In recent years, nationwide shortages of prescription drugs have increased, preventing patients from accessing medications essential to their care. The Food and 

Drug Administration (FDA), an agency within the Department of Health and 

Human Services (HHS), established a Drug Shortage Program with a mission of 

helping to prevent, alleviate, and resolve shortages. FDA receives information about 

shortages from manufacturers, though this reporting is generally voluntary, as well 

as from the American Society of Health-System Pharmacists (ASHP). ASHP tracks 

nationwide shortages for its members through a partnership with the University of 

Utah Drug Information Service (UUDIS). 

GAO was asked to review trends in shortages and examine FDA’s response. In 

this report, GAO: 

(1) reviews trends in drug shortages, 

(2) describes FDA’s response, and 

(3) evaluates FDA’s ability to protect public health through its response to drug 

shortages. GAO analyzed UUDIS data, interviewed officials from FDA, health care 

professional associations, and industry, and also examined relevant statutes, regulations, information, and documents. 

WHAT GAO RECOMMENDS

Congress should consider establishing a requirement for manufacturers to report 

to FDA any changes that could affect the supply of their drugs. In addition, FDA 

should enhance its ability to respond to drug shortages, for example, by developing 

an information system to manage data about shortages. HHS outlined actions it 

plans to take that are consistent with GAO’s recommendations. 

DRUG SHORTAGES—FDA’S ABILITY TO RESPOND SHOULD BE STRENGTHENED

WHAT GAO FOUND

The number of drug shortages has grown substantially since 2006. In total, 1,190 

shortages were reported from January 1, 2001, through June 20, 2011, according to 

UUDIS data. From 2006 through 2010, the number of drug shortages increased 

each year. A record number of shortages were reported in 2010, and 2011 is on pace 

to surpass 2010’s record. Of the shortages, 64 percent involved drugs that were in 

short supply more than once. On average, shortages lasted 286 days (over 9 

months). Over half of shortages reported from January 1, 2009, through June 20, 

2011, that UUDIS identified as critical—because, for example, alternative drugs 

were not available—involved generic injectable drugs. Certain therapeutic classes 

(such as anesthetic, oncology, and anti-infective drugs) were among those most often 

in short supply. 
52 

1 ASHP posts information about drug shortages on its Web site. See http://www.ashp.org/ 

menu/PracticePolicy/ResourceCenters/DrugShortages.aspx. 2See GAO, Drug Shortages: FDA’s Ability to Respond Should be Strengthened, GAO–12–116 

(Washington, DC: Nov. 21, 2011). 

FDA responds to drug shortages by taking actions to address the underlying 

causes and to enhance product availability, for example by providing assistance to 

manufacturers to resolve manufacturing or quality problems that can result in a 

shortage. When informed of the possibility of a shortage in advance, FDA has increasingly been able to prevent potential drug shortages from occurring. FDA prevented 50 potential shortages during the first half of 2011. As part of its response, 

FDA provides general information about drug shortages to the public via its Web 

site. 

FDA is constrained in its ability to protect public health from drug shortages due 

to its lack of authority to require manufacturers to report actual or potential shortages to the agency or the public, or to require manufacturers to take certain actions 

to prevent, alleviate, or resolve shortages. As a result, the agency’s approach to 

managing drug shortages is predominately reactive. FDA’s ability to protect public 

health is also constrained by management challenges that weaken its ability to respond to drug shortages. For example, FDA does not systematically maintain data 

on drug shortages, without which it is unable to monitor trends and enhance its 

ability to address the causes of drug shortages. In addition, FDA has provided limited resources to manage its response to drug shortages and lacks related performance measures and priorities. 

Mr. Chairman and members of the committee, I am pleased to be here today to 

discuss the Food and Drug Administration’s (FDA) response to prescription drug 

shortages. According to FDA, a record number of drugs were in short supply in 

2010, and the number of drug shortages has continued to grow throughout 2011. 

A variety of factors can trigger drug shortages, such as disruptions in the supply 

of the active pharmaceutical ingredients required to manufacture the drug, manufacturing problems, manufacturers’ business decisions, and increased demand for 

products. Drug shortages directly threaten public health by preventing patients 

from accessing medications that are essential to their care. During shortages, physicians may have to ration their supplies, delay treatments, or use alternative medications that may be less effective for the condition, carry unwanted side effects, or cost 

more. Consistent with its mission of protecting the public health, FDA, an agency 

within the Department of Health and Human Services (HHS), established a Drug 

Shortage Program to help prevent, alleviate, and resolve shortages. 

Drug shortages may be reported to FDA by manufacturers, health professionals, 

or the public. FDA also obtains information from the American Society of HealthSystem Pharmacists (ASHP), which tracks and makes information publicly available 

about nationwide drug shortages through a partnership with the University of Utah 

Drug Information Service (UUDIS).1

My statement will highlight key findings from our November 2011 report, which 

is being released today, that reviews trends in prescription drug shortages and 

FDA’s response.2 In that report, we (1) reviewed trends in prescription drug shortages that occurred from January 2001 through June 2011, (2) identified the reported 
53 

3 Red Book is a compendium published by Thomson Reuters that includes information about 

the characteristics of drug products. UUDIS recognized these shortages as critical because alternative medications were unavailable, the shortages affected multiple manufacturers, or the 

shortages were widely reported; because the shortages were determined to be critical, they were 

posted to ASHP’s Web site. 4Specifically, we reviewed information about shortages for five anesthesia drugs (epinephrine, 

neostigmine, propofol, thiopental, and succinylcholine), five oncology drugs (cisplatin, cytarabine, 

doxorubicin, etoposide, and vincristine) and five anti-infective drugs (acyclovir, amikacin, 

cefotetan, clindamycin, and sulfamethoxazole-trimethoprim). Most of these drugs have been 

available in generic form for over 15 years. 5See GAO, Standards for Internal Control in the Federal Government, GAO/AIMD–00–21.3.1 

(Washington, DC: November 1999). 

causes of selected drug shortages that occurred from January 2009 through June 

2011, (3) described FDA’s response to drug shortages, and (4) evaluated the extent 

to which FDA is able to protect the public health through its response to drug shortages. 

To identify trends in drug shortages, we analyzed UUDIS data on the number and 

duration of prescription drug shortages reported to ASHP from January 2001 

through June 20, 2011. We examined these data because FDA did not have a database containing information on drug shortages for the time period we reviewed, and 

UUDIS is generally regarded as the most comprehensive and reliable source of such 

information. Using these data, we identified the number of drugs that had been in 

short supply on multiple occasions and the collective duration of these shortages. 

Using Red Book data, we examined the characteristics of 269 critical drug shortages 

that were identified during a shorter time period, January 1, 2009, through June 

20, 2011.3

To identify the reported causes of selected drug shortages that occurred from January 2009 through June 2011, we focused our analysis on a nongeneralizable sample 

of 15 drug shortages that have had a significant impact on public health. The drugs 

involved in these shortages—all sterile injectables—are from three therapeutic 

classes: anesthesia, oncology, and anti-infective drugs.4 We asked FDA officials to 

provide information on the causes of these 15 drug shortages, as reported to the 

agency by manufacturers. For additional information on the causes of shortages, we 

obtained information from four manufacturers of sterile injectable drugs—APP 

Pharmaceuticals, Bedford Laboratories, Hospira, and Teva Pharmaceuticals. All of 

these manufacturers produce drugs that recently were in short supply, and all of 

the 15 drug shortages we selected for review involved drugs that were manufactured 

by one or more of these manufacturers. 

To describe FDA’s response to drug shortages, we interviewed FDA officials and 

reviewed agency documents, including policies and procedures. To describe how FDA 

responded to the 15 selected drug shortages we reviewed in detail, we examined information the agency provided about its response to these shortages. We also analyzed FDA information on potential drug shortages the agency prevented from January 2010 through June 2011. 

To evaluate the extent to which FDA is able to protect public health through its 

response to drug shortages, we analyzed FDA’s authority under the Federal Food, 

Drug, and Cosmetic Act, and reviewed relevant FDA regulations, policies, procedures, and documents. In addition, we evaluated FDA’s approach to managing its 

response to drug shortages using standards for internal control—including those for 

information and communications, monitoring, and risk assessment.5 We also interviewed a variety of stakeholders—including drug manufacturers, health professional 

associations, and others involved in drug production and the drug supply chain— 

to obtain information about FDA’s response to drug shortages. Our work was performed in accordance with generally accepted government auditing standards. 

In brief, we found that the number of drug shortages has grown substantially in 

recent years, and FDA is constrained in its ability to protect the public health from 

the impact of these shortages. 

The number of drug shortages has grown substantially since 2006, and many 

shortages involved generic injectable drugs. In total, 1,190 shortages were reported 

from January 1, 2001, through June 20, 2011, according to UUDIS data. From 2006 

through 2010, the number of drug shortages increased each year and grew by more 

than 200 percent over this period. A record number of shortages (196) were reported 

in 2010, and 2011 is on pace to surpass 2010’s record, with 146 shortages reported 

through June 20, 2011. Over half (64 percent) of the 1,190 shortages represent 283 

drugs that were in short supply more than once. On average, these 283 drugs were 

each in short supply between 2 and 8 times during this period, with an average of 

2.7 times per drug. While the duration of all reported shortages varied considerably, 

most shortages lasted 1 year or less. On average, shortages lasted 286 days (over 
54 

6See http://www.fda.gov/Drugs/DrugSafety/DrugShortages/default.htm. 

9 months). Over half of shortages reported from January 1, 2009, through June 20, 

2011, that UUDIS identified as critical—because, for example, alternative drugs 

were not available—involved generic injectable drugs. Certain therapeutic classes 

(such as anesthetic, oncology, and anti-infective drugs) were among those most often 

in short supply. 

The drug shortages we reviewed in detail were generally caused by manufacturing 

problems and exacerbated by multiple difficulties. Of the drug shortages we reviewed in detail, 12 of the 15 were primarily caused by manufacturing problems, 

including those that resulted in manufacturing shutdowns, according to information 

provided by FDA and by manufacturers. For example, one manufacturer shut down 

a facility that produces sterile injectable drugs in order to improve the facility’s 

manufacturing capabilities. While the manufacturer expected that the upgrade 

would take 3 months, it instead took 1 year to complete, and as a result, multiple 

drugs that were produced at this facility went into short supply. The remaining 3 

shortages we reviewed were reportedly caused by disruptions in the supply of active 

pharmaceutical ingredients. Officials from FDA and manufacturers explained that 

sterile injectable drugs are complex to make, and as such, can be prone to manufacturing and quality problems. In addition, certain types of sterile injectable drugs, 

such as anti-infective and oncology drugs, can be particularly challenging to manufacture. FDA also pointed out that sterile injectable drugs are being made by a decreasing number of aging facilities, which may contribute to the recent increase in 

manufacturing problems. In addition to the initial problems that caused the shortages, over half of the shortages we reviewed (8 of 15) were subsequently exacerbated 

by multiple other difficulties that arose after the shortages began. These eight 

shortages were each affected by an average of four distinct difficulties that occurred 

in addition to the primary cause of the shortage and generally affected multiple 

manufacturers. During these shortages, multiple manufacturers sometimes experienced the same exacerbating issues once a shortage was already ongoing. For example, 9 of the 15 shortages we reviewed were extended as a result of manufacturing 

problems that occurred in addition to the shortages’ primary causes. It is also important to recognize that some drugs may only be produced by a few manufacturers. 

The drugs involved in the 15 shortages we reviewed were produced by an average 

of three manufacturers at the time the drug went into short supply. According to 

officials from FDA and industry officials, when only a few manufacturers make a 

drug and one cannot maintain production, it can be difficult for the other manufacturers to substantially increase production to ensure that demand for a drug is 

met—even in the absence of any other problems. Officials from one manufacturer 

described recent shortage situations as a perfect storm of several manufacturers coincidentally experiencing manufacturing problems all at the same time. 

• FDA responds to known drug shortages by taking actions to address their underlying causes and to enhance product availability. FDA officials explained that they 

respond to all of the shortages of which the agency becomes aware, and they determine how to address each shortage based on its cause and the public health risk 

associated with the shortage. For example, the agency may provide assistance to 

manufacturers to resolve manufacturing or quality problems that can result in a 

shortage. Our review of FDA’s response to 15 shortages of sterile injectable drugs 

showed that FDA typically used 2 or more types of actions to respond to each shortage, and for 8 shortages, the agency responded with 4 or more types of actions. FDA 

most frequently offered assistance to manufacturers to prevent, alleviate, or resolve 

the shortage, or notified other manufacturers to expect increased demand or encouraged them to increase production. FDA has demonstrated that it can prevent the 

majority of shortages from occurring when it learns of potential supply disruptions 

in advance. FDA prevented 50 potential shortages during the first half of 2011— 

about 1.5 times the number of potential drug shortages (35) prevented during all 

of 2010. To prevent these potential shortages, FDA took some of the same types of 

actions it uses to alleviate and resolve shortages. As part of its response to drug 

shortages, FDA communicates information about shortages to the public via its Web 

site, which lists both current and resolved shortages.6

• FDA is constrained in its ability to protect public health from drug shortages. 

Specifically, FDA is constrained by its lack of authority to require manufacturers 

to provide the agency and the public with information about shortages, or require 

that manufacturers take certain actions to prevent, alleviate, or resolve shortages. 

FDA’s sole authority related to manufacturers’ reporting of drug shortages pertains 

to the discontinuation of approved drugs that are life-supporting, life-sustaining, or 

for use in the prevention of a debilitating disease or condition, when such drugs are 
55 

7See 21 U.S.C. § 356c; 21 CFR § 314.81(b)(3)(iii) (2011). FDA does not have the authority to 

enforce this requirement, for example, by seeking civil monetary penalties. To the maximum extent possible, FDA is to distribute information on the discontinuance of these products to appropriate physician and patient organizations. 

produced by only one manufacturer.7 In such instances, companies are required to 

provide FDA with at least 6 months notice of discontinuations. However, such 

discontinuations have not been the primary cause of most recent drug shortages. As 

a result of these constraints, the agency’s approach to managing drug shortages is 

predominately reactive. While FDA has encouraged manufacturers to report supply 

disruptions to the agency, according to agency officials, less than half of all shortages are reported to the agency by manufacturers. Instead, FDA is most often notified by ASHP, health care providers, or consumers when they are unable to purchase a drug—a point at which the shortage is already affecting public health. 

FDA’s ability to protect public health is also constrained by management challenges 

that weaken its ability to respond to drug shortages. Specifically, FDA does not 

maintain data on drug shortages, such as their causes and the agency’s response. 

Without such data, FDA is unable to systematically monitor trends and enhance its 

ability to address the causes of drug shortages. In addition, despite the increase in 

the number of drug shortages reported in recent years, FDA has not identified drug 

shortages as an area of strategic importance for the agency. It has consistently 

staffed its Drug Shortage Program with a small number of employees. While FDA 

has recognized the significant public health consequences that can result from drug 

shortages, the agency has not developed a set of results-oriented performance 

metrics related to drug shortages, and has not identified drug shortages as an area 

of strategic importance for the agency. Without such management tools, FDA may 

be unable to effectively evaluate its work and improve its ability to protect the public health. 

In conclusion, the number of drug shortages has substantially increased in recent 

years—including those for life-saving medications such as oncology drugs—a situation that has jeopardized the public health. While FDA may not always be able to 

prevent shortages from occurring, the agency’s response to drug shortages is constrained by its lack of authority to require manufacturers to report potential or current shortages to the agency. FDA has demonstrated that when it learns of shortages in advance, it can prevent the majority of such shortages from occurring. 

However, it does not currently have the authority to require manufacturers to 

provide it with information about potential or current shortages, and therefore it 

can only prevent the shortages that it becomes aware of through voluntary reporting. FDA’s ability to protect the public health is also constrained by its own management challenges. The agency has not elevated the priority it places on its response 

to drug shortages, despite the rapid escalation of these shortages. Not only have its 

resources not kept pace with this escalation, the agency has not developed the 

metrics to manage this growing public health problem. Without data and resultsoriented performance measures, FDA cannot systematically monitor drug shortages 

and their causes, nor can it adequately track or assess its own success in preventing 

or mitigating shortages. Although FDA recognizes the serious threat these shortages 

pose, we believe the agency can and must do more to protect the public health. 

Our report includes a matter for congressional consideration that would establish 

a requirement for manufacturers to report to FDA any changes that could affect the 

supply of their drugs. In addition, our report recommends that FDA take steps to 

strengthen its ability to respond to drug shortages by: (1) assessing the resources 

allocated to the Drug Shortage Program; (2) developing an information system to 

enable the Drug Shortage Program to manage its daily workload in a systematic 

manner, track data about drug shortages—including their causes and FDA’s response—and share information across FDA offices regarding drugs that are in short 

supply; (3) ensuring that FDA’s strategic plan articulates goals and priorities for 

maintaining the availability of all medically necessary drugs; and (4) developing results-oriented performance metrics to assess and quantify the implementation of the 

agency’s goals and FDA’s response to drug shortages. 

In commenting on a draft of the report upon which this testimony is based, HHS 

stated that it supports legislation that would require manufacturers to report potential or actual supply disruptions to FDA. In addition, HHS outlined actions it plans 

to take that are consistent with our recommendations. 

Mr. Chairman, this concludes my statement. I would be pleased to respond to any 

questions you or other members of the committee may have. 

The CHAIRMAN. Thank you, Dr. Crosse. 

Mr. Aitken, please proceed. 
56 

STATEMENT OF MURRAY AITKEN, SENIOR VICE PRESIDENT, 

HEALTHCARE INSIGHT, IMS, PARSIPPANY, NJ 

Mr. AITKEN. Mr. Chairman, members of the committee, thank 

you for this opportunity to appear before you today on this important topic. Disruptions in clinical care caused by drug shortages are 

of growing concern among patients, clinicians, suppliers and manufacturers, as well as policymakers. We applaud the efforts to date 

of the FDA, ASPE, and ASHP, and this committee in working to 

understand the problem. 

We believe it’s critical to bring the best available information to 

the discussion of the underlying causes and potential mechanisms 

to prevent shortages or alleviate their effects. That’s why the IMS 

Institute for Healthcare Informatics has undertaken an independent study without industry or government sponsorship, using 

our proprietary data to look at the actual supply of those drugs on 

the shortage lists maintained by the FDA and the American Society of Health System Pharmacists. 

Among the findings from our analysis and included in our report 

are three important points. First, the drug shortage problem is 

highly concentrated in a relatively small number of products that 

are mostly generic and mostly injectables. We see that of the 168 

products in our dataset, 83 percent are generics, 82 percent are 

injectables, and they are almost entirely used in hospital or clinic 

settings for inpatient or outpatient care. 

While the problem may be concentrated in terms of the type of 

products, this is not to say the problem, of course, is small. In fact, 

the 168 products cover every one of the major anatomical therapy 

classes used to categorize therapeutic pharmaceuticals, from analgesics to injectable vitamins. And in the case of 20 injectable oncology products that are on the shortages list, these are drugs that 

over the course of a 12-month period were used to treat 550,000 

cancer patients. So any disruption in the supply of those drugs will 

potentially affect a large number of patients. 

We think, though, that the concentration of the problem is an important point when considering solutions. To the extent that solutions can be focused on the segment of pharmaceuticals and the 

part of the supply chain where disruptions are occurring, we would 

expect a more successful outcome and fewer unintended consequences for the rest of the health care system. 

The second finding from our report is that the term ‘‘shortage’’ 

can have different meanings. For over half of the products on the 

shortages list, our measure of the total monthly volume being 

shipped to end user settings, whether it be a hospital, a clinic, a 

retail pharmacy warehouse, or a mail order facility, that volume 

has, in fact, been steady or even increasing over the past 5 years, 

and this suggests that at a national level there may not be an imbalance between total demand and total supply. Instead, the shortage is being experienced by a particular pharmacy or in a particular region of the country or with a particular wholesaler or 

intermediary. Alternatively, the shortage can be for one specific 

manufacturer of a product even if there is adequate supply from 

other manufacturers. 

For the other 45 percent of the products, though, we do see at 

a national level evidence of significant reductions, on average 26 
57 

percent, in the monthly volume being supplied to hospitals and 

clinics, and even more volatility in monthly volume being supplied 

by individual companies. This can only mean severe disruption 

across the supply chain even if it is for a relatively small number 

of products. 

The third finding relates to the suppliers of these products. We 

see that over half of the products have only one or two suppliers, 

and this means that in the event that one company has a temporary disruption of manufacturing capacity, for whatever reasons, 

it may be very difficult for another company to replace that volume 

quickly and, hence, leading to a shortage. 

Our perspective on recommendations is grounded on what we 

know about the information and analytical approaches that can be 

applied to this situation. We believe a multistakeholder early warning system can be a critical tool to help the FDA, pharmacists, 

manufacturers and intermediaries predict, monitor, and mitigate 

the impact of supply disruptions. Such a system should include a 

systematic approach to risk identification, a continuous forecast for 

long-term demand for the high-risk sectors of the market, a volatility index focused on weekly or monthly changes in the supply 

volume, and that can be a sentinel of instability in the supply 

chain, and predictive modeling that helps keep a tight focus on 

interventions only on those specific parts of the market and supply 

chain that need attention. 

We are grateful for the opportunity to present our perspective 

and we look forward to today’s discussion on solutions that are balanced, coordinated, and sustainable. Thank you. 

[The prepared statement of Mr. Aitken follows:] 

PREPARED STATEMENT OF MURRAY AITKEN

Chairman Harkin, Senator Enzi, and members of the committee, thank you for 

the opportunity to contribute to the discussion of this important topic. Drug shortages have become of increasing concern for patients, clinicians, manufacturers and 

policymakers. While the issue is not entirely new, the increased number of drugs 

reported as being in short supply has precipitated a deeper understanding of the 

underlying causes of the problem, and potential remedies to prevent future shortages or alleviate their impact on patient care. 

I am the Executive Director of the IMS Institute for Healthcare Informatics, 

which is focused on bringing objective, relevant insights and research that will accelerate the understanding and innovation critical to sound decisionmaking and improved patient care. We have recently undertaken a study based on analysis of IMS 

Health data and publicly available drug shortage lists in order to bring new evidence on the products and suppliers involved, and the volume volatility occurring 

in the marketplace. This work has been undertaken as a public service, without industry or government sponsorship. 

METHODOLOGY OF IMS ANALYSIS

The basis of our analysis is a dataset developed by the IMS Institute and based 

on products listed on the Current Drug Shortages Sections of Web sites maintained 

by the U.S. Food and Drug Administration and the American Society of HealthSystem Pharmacists. Information related to products and molecules was accessed on 

October 7, 2011, resulting in an initial list of 197 unique products. Of these products, 11 are considered to be widely available, and a further 18 are products unable 

to be uniquely identified in the IMS databases, leaving 168 products in the final 

dataset. 

For the 168 products, we accessed monthly volume and sales data for the 5-year 

period beginning September 2006 and ending August 2011 from IMS National Sales 

Perspectives. This measures volume in Standard Units and sales within the U.S. 

pharmaceutical market by pharmacies, clinics, hospitals and other healthcare providers. Sales amounts are based on pricing information derived from wholesaler in-
58 

voices to end-users and does not include rebates and discounts commonly negotiated 

between end-users and manufacturers, including Medicaid rebates and 340B discounts. 

Additional information related to distribution channel, therapy class using the 

Anatomical Therapeutic Chemical (ATC) Classification System, and characterization 

of the product as a brand, generic or branded generic was also included and derived 

from IMS National Sales Perspectives. 

For oncology products, patient counts by tumor site and regimen were sourced 

from IntrinsiQ, a unit of AmerisourceBergen Specialty Group, via IMS Oncology Analyzer, for the period of June 2006–June 2011. 

Regional volume usage was derived from IMS Drug Distribution Data (DDD) for 

the period of September 2007 to August 2011. 

KEY FINDINGS

The key findings of our analysis relate to the characterization of the products on 

the shortages list; the suppliers of these products; and the volatility in supply volume for individual products. 

Characterization of the Products on the Shortages List 

Most of the 168 products included in the IMS dataset are injectables (82 percent) 

and generics (83 percent) (Exhibit 1). This points to the concentration of products 

to a segment of the market and suggests the underlying causes and solutions to 

drug shortages should be focused on this part of the overall pharmaceutical sector. 

We also found that most of the products on the shortages list are used in hospital 

or clinic settings. For the injectables, 72 percent of the standard unit volume is supplied to non-federal hospitals, 16 percent to clinics, 3 percent to Federal facilities, 

and the remaining 9 percent goes to retail or other channels. For the oral products, 

the distribution is more directed toward retail channels, accounting for 79 percent 

of the volume, and only 5 percent going to hospitals and 4 percent to clinics. 

Although drug shortages are concentrated in terms of the nature of the products, 

they are extensive in terms of the therapy areas they are used in. In fact, the 168 

products cover all of the major anatomical therapy classes used to categorize therapeutic pharmaceuticals. The largest share of products are used in oncology, representing 16 percent of the products; a further 15 percent are anti-infective prod-
59 

ucts; 12 percent are used to treat cardiovascular disease; 11 percent for central 

nervous system conditions; 9 percent for pain; a further 9 percent are vitamins and 

minerals (mostly in injectable form); and the remaining 28 percent cover a broad 

range of other therapy areas including asthma/chronic obstructive pulmonary disease and immunosuppressants (Exhibit 2). 

The number of patients potentially affected by drug shortages is also extensive. 

In the case of the 20 injectable oncology drugs on the shortages list, we estimate 

that 550,000 cancer patients were treated with at least one of those drugs during 

the past year. This therefore can represent the number of patients whose treatment 

could be affected by any disruption in the supply of these drugs. 

Characterization of Suppliers 

We analyzed the firms supplying the 168 products on our shortages list over the 

past 5 years. In total, 100 companies supplied one or more of the products on the 

current shortages list over the past 5 years. More recently, 98 separate companies 

controlled by 88 corporations were supplying these products during the 3 months 

ending August 2011. The largest generic manufacturers have multiple products (Exhibit 3). 
60 

Over time, we see a number of companies, generally supplying relatively few products, entering and leaving the marketplace. Over the past 5 years the number of 

corporations supplying the 168 products has fluctuated, including 13 corporations 

that have stopped supplying any products on the shortages list during the past 2 

years. This movement among suppliers is one of the underlying causes of the disruption felt by pharmacists when they are no longer able to source their supplies from 

established manufacturers. 

Among the 168 products on the shortages list, we identified 86 products, or 51 

percent of the total, that currently have two or fewer suppliers. Of those 86 products, 56 had only one supplier, and 7 had no suppliers during the 3 months ending 

August 2011 (Exhibit 4). 
61 

While patent protected products have single suppliers and generally do not face 

supply shortages, in the generics market the relatively high number of products 

with very few suppliers may be a contributing factor to supply disruption. In the 

event that one company has a temporary disruption of manufacturing capacity, it 

may be difficult for another company to replace that volume quickly and hence lead 

to a shortage. 

Volatility in Supply Volume 

The average monthly supply from wholesalers to end-user settings for the total 

set of 168 products has, in aggregate, increased slightly over the past 5 years. For 

the injectable products, the average number of standard units supplied monthly increased from 54 million in 2006 to 56 million in 2011. For the smaller number of 

oral products, volume increased from 125 million to 157 million during the same reference period (Exhibit 5). 
62 

A closer examination reveals that three distinct segments exist among the drugs 

on the current shortages list: 

(a) a ‘‘declining’’ set of 75 products that have recent monthly supply volume of less 

than 80 percent of a base period defined as September 2006–August 2009; 

(b) a ‘‘stable’’ set of 56 products whose recent monthly supply is between 80 percent and 120 percent of the base period; and 

(c) a ‘‘growing’’ set of 31 products where monthly supply is at least 20 percent 

more than the base period. 

(An additional 6 products were introduced during the 5-year period and not included in the above segmentation.) 

In aggregate the declining segment of 75 products have seen monthly supply fall 

about 47 percent over the 5-year period. For the injectable products, average monthly volume has fallen from 16 million to 8 million standard units for month (Exhibit 

6). Included in this segment are 12 oncology drugs, 11 anti-infectives, and 12 cardiovascular drugs, among others. 
63 

For the remaining 55 percent of products in the stable or growing segments, the 

total volume has not declined, but there may be volatility among the suppliers of 

the individual products. For example, cisplatin—a widely used platinum-based 

alkylating agent used in treating about 85,000 patients for a variety of cancer treatments in the past year—has had some volatility in total monthly supply volume, but 

overall shows a growing volume trend over time. However, a significant level of volatility in supply at the individual company level is evident, including the discontinuation of production in mid-2010 by one company that had been the leading supplier 

of cisplatin in the 2007–8 period (Exhibit 7). This level of volatility reflects disruption throughout the supply chain which ultimately affects providers and patients. 
64 

Exhibit 7 

Across the 50 States we see varying levels of volatility in the supply of products 

on the shortage list. For example, for the 64 injectable products included in the declining segment, the average decline in monthly per capita use between the 12 

months ending August 2010 and the 3 months ending August 2011 was 26 percent. 

Between the two time periods, 13 States had declines in excess of 30 percent suggesting a significant disruption to patient care in a short time period (Exhibit 8). 
65 

RECOMMENDATIONS

Our analysis provides new insights—based on granular information—about the 

characterization of the products on current drug shortages lists, the suppliers of 

those products and a deeper, industry-wide understanding of the volume dynamics 

and volatility for individual molecules and suppliers of those molecules. Our perspective on recommendations is focused on how existing information and analytical 

approaches can be applied to preventing or alleviating the affects of shortages going 

forward. Specifically, we believe that an Early Warning System for drug shortages 

created by the FDA or the industry can be a critical tool to help the regulator, pharmacists and other stakeholders predict, monitor or mitigate the impact of supply 

disruptions on the healthcare system. 

Specifically, the Early Warning system should include the following elements: 

1. Risk Identification: Systematically identify the high-risk sectors of the 

generics market. Identify all the low-cost, technically challenging and critical medicines—whether or not they are currently on shortage lists. 

2. Demand Forecasting: Continuously forecast the long-term demand for lowcost, technically challenging and critical medicines. Adjust forecasts based on such 

factors as demand trends, new medications, changes in clinical guidelines, practice 

patterns, care delivery changes and needs of clinical trials. 

3. Volatility Index: A quantitative measure to systematically track and report 

month-to-month changes in the volume of drugs supplied to hospitals, clinics and 

retail pharmacies. Volatility in supply—whether national, regional, by individual 

supplier, or for specific drug molecules—is a sentinel of problems in meeting demand and instability or dramatic change in the supply chain. Volatility itself can 

seriously exacerbate problems in meeting demand, encourage overstocking, disrupt 

patient therapies and facilitate short-term price manipulation by a few suppliers. 

4. Predictive Modeling: With the wealth of data available, predictive modeling 

techniques could be applied to anticipate shortages or supply disruptions for critically important medications at the national and regional levels. As data accumulate 

and measures are improved, the model can tightly focus interventions on those specific parts of the market and supply chain genuinely needing attention. 
66 

Other tools would augment the Early Warning System, including self-reporting of 

demand and supply disruptions by pharmacies, wholesalers, group purchasing organizations and drug manufacturers. 

Other tools and mechanisms are needed to augment the Early Warning System, 

including self-reporting of demand and supply disruptions by pharmacies, wholesalers, group purchasing organizations and drug manufacturers. 

We are grateful for the opportunity to present our perspective to this committee 

and look forward to discussion of the potential solutions. 

The CHAIRMAN. Thank you, Mr. Aitken. 

Mr. Neas, welcome back to the committee. 

STATEMENT OF RALPH G. NEAS, J.D., CHIEF EXECUTIVE OFFICER, GENERIC PHARMACEUTICAL ASSOCIATION, WASHINGTON, DC 

Mr. NEAS. Thank you, Mr. Chairman, and thanks, every member 

of the committee. We are very grateful for your focus on the issue 

of drug shortages. I am Ralph G. Neas, and I’m president and CEO 

of the Generic Pharmaceutical Association. GPhA represents the 

manufacturers and distributors of finished-dose generic pharmaceuticals, bulk pharmaceutical chemicals, and suppliers to the generic industry. At its core, GPhA’s purpose is to improve the lives 

of consumers by providing timely access to affordable pharmaceuticals. 

The shortage of critical drugs is a complex, multifactor problem 

involving many stakeholders. However, much of the shortage problem could be solved by improving the information available both 

from and to the various stakeholders. These stakeholders would include drug manufacturers, wholesalers, distributors, group purchasing organizations, the FDA, the DEA, and possibly others. 

Today, we propose the creation of an accelerated recovery initiative, or ARI. ARI would utilize an independent third party, or ITP, 

as an unprecedented information clearinghouse to collect information regarding the aggregated available supply of critical drugs, in 

essence establishing a consolidated supply schedule, and then to 

use this information to identify potential gaps in supply compared 

to market requirements. 

Upon the acceptance of ARI by both the FTC and HHS, the initiative’s mission would be to increase early visibility and communication between the FDA and industry relating to both current 

and potential drug shortages. Of course, the ITP would be gathering and disseminating information in compliance with all current 

market regulations and only under terms of strict confidentiality. 

Efforts would be focused exclusively on critical products where a 

shortage is expected to last longer than 90 days, and the initiative 

would operate in a way that would neither restrict competition nor 

cost taxpayers money. 

There can be no question that generic manufacturers are in the 

business of supplying medicine and ensuring that consumers and 

patients have access to the drugs they need. Contrary to some 

media reports, shortages are typically not caused by a manufacturer’s decision to voluntarily discontinue supplying the product. Indeed, manufacturers do not and would never deliberately reduce 

the supply of essential medicines to push prices up. 

However, without sufficient information, our efforts sometimes 

can be misplaced. As one manufacturer put it, we try, but without 
67 

knowing more, we occasionally end up over-solving one shortage 

while under-solving another. The FDA, working with industry 

through ARI, can help prevent this from happening. Indeed, ARI 

will allow the FDA and the industry to ensure that limited resources are aimed at the highest priority needs. 

This is how the initiative would work. A list of critical products 

will be determined, incorporating data from multiple sources. With 

respect to these products, industry will share information with the 

ITP regarding both available and future supply. The ITP will aggregate this data and communicate where gaps in critical products 

are found. Based on this information, individual manufacturers will 

indicate to the ITP how they each could address the shortage. 

This feedback loop would continue to help focus industry efforts 

for the most critical products on the list. As a result, manufacturers will be able to focus their production with a clear understanding of which shortages are being addressed and which are 

not. ARI will provide greater clarity to available supply of the list 

of drugs, as well as projected timelines for recovery. 

In addition to the initiative I’ve just outlined, GPhA believes that 

a recovery from this crisis could be further accelerated through creating a high-level team at the FDA. This team would enable decisionmakers from across the agency and manufacturers to devise 

strategies to address or avert critical shortages. We’ve come to 

think of this, and have shared with the FDA and with HHS, as an 

FDA SWAT team which could work with industry to make sure 

listed products are making it to the market. 

To be clear, this is not a criticism of the FDA. To the contrary, 

GPhA applauds the FDA’s efforts to ensure that the U.S. drug supply remains the safest in the world. This recommendation is based 

on the recognition that regulatory efforts sometimes can have the 

unintended consequence of disrupting the supply of critical products. In fact, as we examine the current crisis, more than half of 

the shortages have stemmed from regulatory concerns. However, 

simply by using this SWAT team approach, we believe that the 

FDA could greatly minimize these unintended consequences without compromising safety in any way. 

GPhA is committed to working with this committee, the FDA, 

the DEA, and all stakeholders to minimize current drug shortages 

and prevent future shortages from occurring. Nothing is more important to our industry than providing patients access to their lifesaving generic medications. With an intense and timely multistakeholder collaboration, we believe we can accomplish this goal. 

Thank you, Mr. Chair. 

[The prepared statement of Mr. Neas follows:] 

PREPARED STATEMENT OF RALPH G. NEAS, J.D. 

SUMMARY

I am Ralph G. Neas, President and CEO of the Generic Pharmaceutical Association, which represents the manufacturers and distributors of finished dose generic 

pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals 

and suppliers of other goods and services to the generic industry. 

Before examining how best to respond to drug shortages it is important to understand that this is a complex, multi-faceted issue and the generic industry has, and 

will continue, to work tirelessly to be part of the solution. Causal factors of drug 

shortages are numerous and do not apply in every case. They include everything 
68 

from challenges in manufacturing and an insufficient supply of available raw materials to meet demand, to inadequate and delayed communications about shortages— 

both within the supply chain and also within and among the Food and Drug Administration’s (FDA) enforcement and drug shortages personnel. 

A group of generic manufacturers, including both GPhA and non-GPhA members, 

that represent approximately 80 percent of the generic sterile injectable products 

sold in the United States, are proposing to take unprecedented steps to build tools 

and practices that are specifically designed to accelerate the recovery of critical 

drugs in short supply. 

Under this recommended proposal, known as the Accelerated Recovery Initiative (ARI): 

• An independent third party will gather current and future supply information 

from stakeholders for products identified as meeting the critical criteria; 

• This will then be used to determine current and potential supply gaps, with a 

focus on those products where a shortage is expected to last longer than 90 days; 

• FDA Drug Shortage staff will be updated when assistance is needed to facilitate 

production of a product in shortage; and 

• A high-level team will be formed within FDA with the ability to quickly respond 

to critical shortages. 

ARI is predicated on voluntary communication between an independent third 

party and stakeholders involved in the manufacturing and distribution of generic 

injectable drugs in shortage, including, but not limited to: manufacturers, wholesalers, distributors, Group Purchasing Organizations (GPO’s) and the FDA. In addition, this multi-stakeholder approach will provide additional information focusing on 

real-time decisions and actions proposed by regulatory agencies and their potential 

impact on critical supply. 

This initiative will maintain robust competition, and will not in any way deal with 

pricing information. It will also require prior acceptance by the Federal Trade Commission and the Department of Health and Human Services. The type of information gathered and disseminated will increase early visibility and communication between the FDA and industry relating to current and potential drug shortages. 

ARI also focuses on FDA. The agency deserves tremendous credit for the work it 

is currently doing to expedite regulatory reviews and work closely with manufacturers. However, there is still more that must be done, and manufacturers would be 

aided by a formal process specifically designed to facilitate communications related 

to drug shortage regulatory issues. The industry strongly encourages the establishment of a high-level FDA drug shortage management team, which would include 

representation from key agency offices. This team would provide an avenue for timely access to FDA decisionmakers by the pharmaceutical industry to review strategies for addressing or averting drug shortages. This high-level FDA team would also 

be empowered to evaluate issues such as expediting reviews of pending supplements, which enable industry to address shortages of critical drug products. 

GPhA is committed to working with the FDA and all stakeholders to minimize 

current drug shortages and prevent future shortages from occurring. Nothing is 

more important to our industry than ensuring patients have access to their lifesaving generic medications, and with a joint effort among all involved we believe 

we can make a significant step toward accomplishing this goal. 

Good morning Chairman Harkin, Ranking Member Enzi and Members of the Senate Committee on Health, Education, Labor, and Pensions. Thank you for asking 

me to participate in this very timely and important hearing. 

I am Ralph G. Neas, President and CEO of the Generic Pharmaceutical Association. GPhA represents the manufacturers and distributors of finished dose generic 

pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals 

and suppliers of other goods and services to the generic industry. Generic pharmaceuticals now fill 78 percent of all prescriptions dispensed in the United States, but 

consume just 25 percent of the total drug spending. 

According to an analysis by IMS Health, the world’s leading data source for pharmaceutical sales, the use of FDA-approved generic drugs in place of their brand 

counterparts has saved U.S. consumers, patients and the health care system more 

than $931 billion over the past decade—$158 billion in 2010 alone—which equates 

to $3 billion in savings every week. 

GPhA is the third major coalition that I have had the privilege of leading. For 

15 years, I served as the executive director of the Leadership Conference on Civil 

and Human Rights, a 60-year-old coalition of nearly 200 organizations that is the 

legislative arm of the civil rights movement. 
69 

For the past several years, I was the President and CEO of the National Coalition 

on Health Care, the Nation’s oldest and most diverse health care reform coalition. 

The 80 organizations that make up NCHC represent consumers, health care providers, large and small businesses, unions, older Americans, medical societies, minorities, pension funds, religious denominations and people with disabilities. 

Personally, I am strongly committed to the perspective of patients. I came down 

with Guillain-Barre Syndrome (GBS) 32 years ago, an often serious neurologic disorder, usually reversible, that kept me in the hospital for 155 days. More than half 

of those days were spent in the intensive care unit unable to speak, on a respirator, 

and totally paralyzed. That harrowing experience led me to help found the GBS 

Syndrome Foundation International, which now represents 35,000 former GBS patients. In October, we celebrated our 30th Anniversary. With these experiences in 

mind, I am proud to be here today representing GPhA and I am equally proud of 

the work our member companies are doing to resolve drug shortages. 

INTRODUCTION

I would like to begin today by commending the committee for your focus on this 

important issue. As members of the public who also are affected by shortages, the 

generic pharmaceutical industry is devoted to working with all stakeholders to minimize current shortages and mitigate factors that could contribute to future shortages. We are acutely aware of the distress caused to patients, families and clinicians 

by the shortage of critical drugs. Drug shortages represent a complex, multi-faceted 

issue and our industry has, and will continue, to work tirelessly to be part of the 

solution. 

WHY ARE SHORTAGES OCCURRING?

Before examining how best to respond to drug shortages it is important to understand why they are occurring. Contrary to some media reports, drug shortages are 

typically not caused by a manufacturer’s decision to voluntarily discontinue supplying the product, and manufacturers do not—and would never—deliberately reduce the supply of essential medicines to push prices up. There can be no question 

that generic manufacturers are in the business of supplying medicine and assuring 

that consumers and patients have access to the drugs they need. 

Causal factors of drug shortages, rather, are numerous and do not apply in every 

case. They include everything from an insufficient supply of available raw materials 

to meet demand, to inadequate and delayed communications about shortages—both 

within the supply chain and also within and among the Food and Drug Administration’s (FDA) enforcement and drug shortages personnel. 

GPhA also acknowledges that while factors contributing to drug shortages are 

many and complex, roughly half of the reported shortages have been attributed to 

problems associated with the manufacturing and release of generic sterile injectable 

products. The manufacturing community has been responsive to this issue and has 

been extremely active in working with all stakeholders, and especially the FDA, to 

find suitable solutions that accelerate the availability of critical drugs in short supply. GPhA and our member companies have spent months working with both policymakers and manufacturers to develop strategies to alleviate shortages and better 

collaborate with other stakeholders. 

I have also paid close attention to recent congressional hearings examining the 

economics of drug shortages and potential economic incentives. I am pleased to see 

that new and innovative ideas to address the problem of drug shortages continue 

to be discussed by the Congress. After speaking to GPhA’s membership, our member 

companies have indicated that improved communication, an expedited process for 

qualifying alternative suppliers and increased collaboration among stakeholders 

would address the causes of the vast majority of shortages. 

INSUFFICIENT COMMUNICATION

As the regulatory authority charged with maintaining oversight of the U.S. drug 

supply, the FDA has stepped up its enforcement efforts to unprecedented levels in 

recent years. Due to the efforts of the FDA, the U.S. drug supply remains the safest 

in the world. GPhA applauds these efforts and is committed to working with the 

agency to ensure that patients continue to receive safe and effective generic medications. With the implementation of these expanded enforcement measures, however, 

comes a need for industry and the FDA to communicate effectively at all stages of 

the process. Otherwise, these efforts may have the unintended consequence of adversely affecting our country’s supply of critical drugs. Indeed, more than half of the 

current drug shortages have stemmed from regulatory concerns. 
70 

One way to avoid such unintended consequences is by implementing processes 

whereby remedial measures could be implemented without completely disrupting 

the manufacturing of necessary products. Through additional remedial measures, 

the FDA could maintain its vigilance over the safety of the U.S. drug supply, while 

still ensuring that patients are receiving the medication they need. It is critical that 

the FDA and industry increase early communication relating to all proposed or contemplated regulatory actions that would affect our country’s supply of critical drugs. 

QUALIFYING ALTERNATIVE SUPPLIERS

Another important factor to note is that the pharmaceutical marketplace overseen 

by the FDA today is one that has become increasingly global. Nearly 40 percent of 

all prescription drugs dispensed in the United States are now manufactured outside 

of the country, and nearly 80 percent of the ingredients in our drugs are manufactured abroad. According to FDA estimates, the number of drug products made outside of the United States doubled from 2001 to 2008. 

Manufacturers face significant delays in the process to qualify alternate Active 

Pharmaceutical Ingredient (API) suppliers and secondary or redundant manufacturing facilities. As a result, many drugs only have one API supplier approved in 

their applications and are qualified in just one facility. This is in contrast to many 

other regions of the world, where supplemental API suppliers can be approved in 

as little as 30 days. Similarly, a prior approval supplement can take multiple years 

in the United States while similar changes are accomplished in Europe and elsewhere within a much shorter timeframe. 

The FDA should bring its oversight in this area up to date with today’s global 

pharmaceutical marketplace. A more streamlined and timely process for qualifying 

new or alternate raw material suppliers and alternate manufacturing facilities 

would allow manufacturers to increase production of medicines in short supply sooner. 

COLLABORATION AMONG STAKEHOLDERS IS NEEDED

We believe these changes would provide a strong start toward reversing the drug 

shortages currently afflicting patients and preventing further ones from occurring. 

But as an industry whose entire business model is to make quality medicines available and affordable to all, we are acutely aware that a lack of supply of a critical 

drug can be devastating, even if it impacts only one patient. Despite all of the factors currently contributing to shortages, there are still numerous opportunities for 

generic manufacturers, and all stakeholders, to work together in an effort to solve 

the problem. 

With this in mind, the generic pharmaceutical industry has spearheaded the development of an unprecedented multi-stakeholder communication tool, which we believe will accelerate the recovery of critical drugs in short supply to patients in need. 

This database of information, which we have labeled the Accelerated Recovery Initiative, or ARI, can be utilized by all stakeholders involved in the manufacturing 

and distribution of vulnerable drugs in shortage—including, but not limited to manufacturers, wholesalers, distributors, Group Purchasing Organizations (GPO’s) and 

the FDA—in order to accelerate the recovery of critical drugs in short supply to patients in need. In addition, this multi-stakeholder approach will provide additional 

information to focus on decisions and actions proposed by regulatory agencies and 

their potential impact on critical supply. Let me provide some more details. 

ACCELERATED RECOVERY INITIATIVE (ARI)

A group of generic manufacturers, including both members of GPhA and nonmembers, representing approximately 80 percent of the generic sterile injectable 

products sold in the United States today, are proposing to take unprecedented steps 

to establish tools and practices that are specifically designed to accelerate the recovery of critical drugs in short supply. The goal of ARI is to put in place industry practices that provide a more accurate, timely and comprehensive view of the current 

drug shortage situation, provide greater visibility to shortages and establish practices that allow for potential, voluntary production adjustments to lessen or eliminate the impact of a current shortage. Given the nearly 200 products currently identified by the FDA Drug Shortage staff, the initial scope of the initiative will focus 

only on those products deemed most critical, which currently focuses exclusively on 

sterile generic injectable products. We will continue to fine tune the inclusion criteria with a focus on products that have few manufacturing options and no therapeutic alternative. 

As I noted, this initiative is predicated on voluntary communication between an 

independent third party and stakeholders involved in the manufacturing and dis-
71 

tribution of generic injectable drugs in shortage, including, but not limited to: manufacturers, wholesalers, distributors, Group Purchasing Organizations (GPO’s) and 

the FDA. In addition, this multi-stakeholder approach will provide additional information focusing on real time decisions and actions proposed by regulatory agencies 

and their potential impact on critical supply. 

In order for this type of initiative to work, each stakeholder involved in the manufacture, supply and distribution of critical drugs in shortage that is willing to participate will communicate necessary information to the FDA Drug Shortage staff. 

Safeguards will be put in place to ensure that market and manufacturing information is treated with appropriate care. 

Further, this initiative will not limit or restrict competition, and will not in any 

way deal with pricing information. It will also require prior acceptance by the Federal Trade Commission and the Department of Health and Human Services. 

The primary focus of the ARI is to gather the current and future supply information from stakeholders for those products identified as meeting the critical criteria. 

This will then be used to determine current and potential supply gaps, with a focus 

on those products where a shortage is expected to last longer than 90 days. This 

type of information will increase early visibility and communication between the 

FDA and industry relating to current and potential drug shortages. 

The supply information will be gathered and disseminated by an impartial third 

party in compliance with all current market regulations and under terms of strict 

confidentiality. This independent third party will be supplied with data related to 

drugs currently in shortage or expected to go into shortage, including the name of 

the drug, the expected duration of the shortage and internal reviews to identify production capabilities to respond to any market shortage. Wholesalers and distributors 

will also supply product availability data to assure a complete review of all available 

inventories. The independent third party will then aggregate the data to provide an 

overall view of the projected available supply by product, as defined by critical product criteria, compared to the total market need. If the data reveals gaps in market 

supply that require FDA intervention, the information will be provided by the independent third party to the FDA Drug Shortage staff so that they may help to develop solutions with the manufacturers. 

In addition, wholesalers, distributors, distribution partners and GPO’s also have 

an important role to play. It is necessary for both wholesalers and GPO’s to establish a ‘‘critical drug supply program’’ that will be implemented during the time when 

a drug in shortage is in a supply recovery period. A supply recovery period is the 

time in which a product is in shortage and has not returned to market demand levels. The focus of the program will be to assure that timely and accurate information 

is readily available to all affiliated members, institutions and customers. 

The last step of ARI focuses on FDA. The agency deserves tremendous credit for 

the work it is currently doing to expedite regulatory reviews and work closely with 

manufacturers. However, there is still more that must be done, and manufacturers 

would be aided by a formal process specifically designed to facilitate communications related to drug shortage regulatory issues. The formation of a FDA drug shortage management team could more effectively address current drug shortages and 

minimize future shortage events. The industry strongly encourages the establishment of a high-level FDA drug shortage management team, which would include 

representation from key agency offices. This team would provide an avenue for timely access to FDA decisionmakers by the pharmaceutical industry to review strategies for addressing or averting drug shortages. This high-level FDA team would also 

be empowered to evaluate issues such as expediting reviews of pending supplements, which enable industry to address shortages of critical drug products. 

From an industry perspective, the formation of such a team that includes highlevel representatives from the FDA’s Center for Drug Evaluation and Research medical staff, Office of Compliance, Drug Shortage staff and Office of Regulatory Affairs 

could provide the expertise and the appropriate level of authority to effectuate rapid 

decisions on steps to address drug shortages. 

We recommend that industry work with FDA and other stakeholders to implement the ARI communication tool in parallel with our other recommendations in 

order to increase the channels of communication and strengthen our collective ability to supply patients with the medicines they critically need. 

CONCLUSION

In conclusion, Mr. Chairman, GPhA is committed to working with the FDA and 

all stakeholders to minimize current drug shortages and prevent future shortages 

from occurring. Nothing is more important to our industry than ensuring patients 

have access to the lifesaving generic medications they require, and with a joint ef-
72 

fort among all involved, we believe we can make a significant step toward accomplishing this goal. 

The CHAIRMAN. Thank you very much, Mr. Neas. 

And now, Dr. Maris, if you’ll sum up, I’d appreciate that. Please 

proceed. 

STATEMENT OF JOHN M. MARIS, M.D., CHIEF, DIVISION OF 

ONCOLOGY, CHILDREN’S HOSPITAL OF PHILADELPHIA, PA 

Dr. MARIS. Mr. Chairman, Senators, ladies and gentlemen, thank 

you for the opportunity to speak to this panel today, and I’d like 

to take this opportunity to thank Senator Casey for his very kind 

introduction. Senator Casey has been a firm advocate for children, 

a leader in this area, and with Senator Klobuchar, the legislation 

before us and the eloquent discussion today, we’re very encouraged 

that there’s movement, and we look forward to this committee’s 

role in reaching solutions. 

Today I’d like to speak to you as a pediatrician, as an oncologist, 

and also as a cancer researcher, to really cover three points in my 

5 minutes. I’d like to talk to you about how our organization, the 

Children’s Hospital of Philadelphia, has responded to this crisis. I 

would like to talk to you as an oncologist and how this has affected 

me and my practice and the patients that I serve. And I’d also like 

to spend a brief minute talking about something that hasn’t been 

discussed here that much, how this is affecting something that we 

in this country should be so proud of, which is our clinical research 

enterprise and how this is impacting dramatically clinical trials 

and making advancements. 

I think I speak for all of us in the field when I say that sitting 

here today we feel like we’ve dodged a bullet to date. We feel that 

there is this impending sense that if the status quo remains or 

there aren’t substantive solutions really soon, that we are going to 

see unintended consequences of this. 

As far as I know, there’s not a reportable death, yet, that’s directly linked to drug shortage, but in my opinion it’s just a matter 

of time, and that’s why I’m very hopeful that this committee—and 

I sense the urgency here—will really address this and address this 

quickly so that our patients will be protected. 

The Children’s Hospital of Philadelphia is the largest pediatric 

health care organization in the Nation. Over a million patients 

walk through our doors each year. And we’ve invested heavily in 

this problem. It was interesting to hear how many staff there are 

at the FDA. At CHOP we’ve needed to have three full-time people 

work on this problem. We have three individuals who do nothing 

else but deal with the drug shortage issue. 

We’ve had to get innovative. We had to purchase infrastructure 

to, believe it or not—we’re talking about sterile injectables. These 

are solutions that come in small vials. We have robotics now that 

can take these solutions out, actually preserve every last drop of 

it so that we can get this out to our small patients and really be 

as efficient as we can. And we have an intensive monitoring system. And I can tell you that as I sit here today, these are just data 

from today, that there are 35 drugs that we use every day that we 

only have knowledge that we’ll be able to have for the next 4 to 

8 weeks, 9 drugs with 2 to 4 weeks supply, 10 drugs with less than 
73 

2 weeks supply, and there are 8 drugs that we commonly use at 

Children’s Hospital that we don’t have right now. And these are 

important drugs. 

To be clear, what we’ve put into place at CHOP is possible because of the resources we have, the intellectual resources, but it’s 

not sustainable and it’s probably not replicatable by many places 

across the Nation. 

We’ve heard some anecdotes, and Senator Klobuchar opened with 

a child with leukemia, and indeed let me just tell you briefly what 

happened last summer. Despite everything we had in place at 

CHOP, there was a 6-week period where we could not get a drug 

called daunorubicin. We’ve heard doxorubicin mentioned here 

today. There’s another medicine called daunorubicin. We could get 

the doxo, and we had met and talked about this issue, and we 

needed to substitute it. 

Just imagine for a minute that you’re a parent or a grandparent 

and you’re sitting in a room with a physician who is giving you the 

news that your child or grandchild has cancer, and that we have 

researched this over the years and we’ve figured out a solution 

that’s going to work most of the time. But one of the drugs, one 

of the key essential ingredients, we don’t have. 

And so we’re going to come up with a Plan B. And, no, we have 

not been able to research this plan. And, no, there’s really not evidence that it’s going to work as well. But that’s what we’ve needed 

to do, and we’ve needed to do it repeatedly. 

In this particular situation, doxo, which we thought should be a 

good replacement for dauno, it’s too early to know whether these 

patients will relapse and whether it impacted, but it definitely 

made them more sick. Children got mouth sores, got infections, 

spent time in the ICU. No child died from this, but there was no 

doubt it was the unintended consequence of serious toxicity due to 

this substitution. 

You have to understand that cancer care at a place like CHOP 

is very complex, dozens of therapies at the same time, an electronic 

health record that has hundreds and hundreds of treatment protocols. So just replacing a drug is something that is subject to human 

error and is a very time-consuming and inefficient process that we 

need to get beyond. 

My last point is that each of the children over the summer and 

most of the children treated in pediatric health care institutions for 

cancer are on clinical trials, and there’s no doubt that we still don’t 

have a sense of how these changes to the backbone of chemotherapy in clinical trials is going to affect our understanding of how 

to move the field forward. 

I think it’s also very important to emphasize that there is a lot 

of excitement about developing new drugs, new therapies for cancer, and that’s the sort of work that I do. But there is an unrealistic assumption that they’re going to replace these drugs that 

we’re talking about today, and that’s not true at all. The new drugs 

are built on the backbone. Cancer research is incremental, and it’s 

very frustrating to me to have these new drugs, some of which 

we’ve developed, and we’re ready to move them into clinical trials, 

but we can’t even use the backbone that we’re going to need to 
74 

build on. And so this is an incredibly important part of the debate 

that I think has not been discussed here in detail today. 

Mr. Chairman, I’m very pleased to be part of this process and to 

give the frontline view of what we see as a critical problem. I’ve 

been there in the room looking a family in the eye to tell them we 

don’t have a drug, and this is something that I look to this committee and members of the panel to find solutions as quickly as 

possible. Thank you. 

[The prepared statement of Dr. Maris follows:] 

PREPARED STATEMENT OF JOHN M. MARIS, M.D. 

My name is Dr. John Maris, Chief of the Division of Oncology at The Children’s 

Hospital of Philadelphia (CHOP) and Director of our research institute’s Center for 

Childhood Cancer Research. CHOP is the Nation’s largest pediatric healthcare network with over 50 locations throughout Pennsylvania and New Jersey and has over 

1 million patient encounters each year, which requires significant need for generic 

drugs that are relatively common and orphan drugs that are not widely used because of the high acuity and specialized nature of many of our patients. 

We are concerned with the inadequate supply of life-saving cancer drugs used in 

my pediatric oncology patients, anesthetics used during surgery, and a large number 

of ‘‘sterile injectables’’ used by our neonatologists in many of our most vulnerable 

patients. In response, CHOP’s pharmacy developed a customized database that provides real-time information on our day-to-day supplies. The number of drugs in 

short supply at our hospital has been steadily increasing. In fact, there are eight 

drugs that we have completely run out of, forcing us to substitute potentially equally effective, but often less desirable, replacements. 

For example, CHOP was unable to obtain daunorubicin, a drug known to be essential for the cure of childhood leukemias—the most common pediatric malignancy—and part of our standard of care for over two decades. We were then forced 

to use the drug doxorubicin as a replacement, despite there being no data available 

on the safety and effectiveness of this as a leukemia therapy or any other replacement. Withholding the drug altogether would definitely result in a much higher risk 

for relapse. While it is too soon to know if the substitution impacted the curability 

of these children, we noted significantly more side effects, mainly severe mouth and 

gut ulcerations, fever and infections. While no child died from these complications, 

it is my opinion that it is only a matter of time before this type of tragedy will occur. 

Absence of a single drug requires us to rewrite the formulary and road maps for 

each patient who may receive a substitution, a procedure which is highly complex, 

resource intensive, and frankly highly subject to human error. Further, each of the 

children who received the substitution over the summer were in the midst of a clinical trial and we are deeply concerned that these types of deviations from accepted 

practice will impact NCI-sponsored clinical trial results. 

While in most cases we are able to address such challenges in our pharmacy, I 

suggest that any solution involve a partnership between providers, manufacturers 

and government. This begins by making sure that information on impending shortages is delivered responsibly and in real time because the lack of notice of a medication becoming unavailable can put patients at significant risk since many times 

there are not appropriate alternative therapies for critically ill children, or those 

with rare diseases. Other critical information we need is an accurate estimate of resupply dates so that we can accurately determine the most appropriate conservation 

practices. Abolishing ‘‘gray market’’ practices would also help assure patient safety, 

maximize legitimate supplies, and keep healthcare costs down. 

It is important to note that the NCI infrastructure has supported major advancements in recent years in the development of completely new and impactful treatments to cancer. However, each of these advances is built on the backbone of existing therapies, almost all of which are off patent at this time. Without the bedrock 

of established and curative drugs, recent discoveries mean many of our most seminal advances in the field are in jeopardy of being reversed due to this issue. Tools 

that help doctors provide excellent patient care need to be readily available and continuously improved and these include pharmaceuticals. We must remember at the 

epicenter of this issue is the patient and I hope the information I shared will further 

invigorate your efforts to ensure that drugs are readily available for the people that 

depend upon them most. 
75 

Good morning. My name is Dr. John Maris, Chief of the Division of Oncology at 

The Children’s Hospital of Philadelphia and Director of our research institute’s Center for Childhood Cancer Research. In addition, I am a Professor of Pediatrics at 

the University of Pennsylvania where I direct the Pediatric Oncology Program in 

our National Cancer Institute funded comprehensive cancer center. 

I thank Chairman Tom Harkin and Senator Mike Enzi for holding this hearing 

today, in addition to Senator Bob Casey, Jr. who has made this and other issues 

impacting the lives of children a high priority. 

The Children’s Hospital of Philadelphia, or CHOP as it is more widely known, is 

the Nation’s largest pediatric healthcare network with over 50 locations throughout 

Pennsylvania and New Jersey. We have over 1 million patient encounters each year 

and are home to one of the largest pediatric research programs in the country. 

CHOP shares the highest ranking on U.S. News & World Report’s Honor Roll of the 

Nation’s best children’s hospitals. Our main hospital in West Philadelphia provides 

tertiary and quaternary care to a number of children having multiple chronic conditions or who are affected by rare pediatric diseases. Because of our high volume, 

we have an expansive need for generic drugs that are relatively common but we also 

utilize orphan drugs that are not widely used because of the high acuity and specialized nature of many of our patients. 

As a physician focused on childhood cancer, my top priority is to make sure patients receive the best and safest care possible. As a researcher, I am dedicated to 

finding cures for cancer while minimizing or eliminating any side effects that result 

from the treatments we provide to this very vulnerable group of children. Both roles 

have enabled our research team to identify the main genes associated with neuroblastoma, an extremely aggressive form of childhood cancer. As a result, we have 

moved some of these discoveries toward new therapies, a number of which are now 

in clinical trials and we certainly hope will someday lead to a cure. 

We work relentlessly to overcome obstacles in our work. The drug shortage we 

discuss today is one that has had a very potent impact on the progress we strive 

to make in research and clinical care. It slows down our progress and can even bring 

it to a grinding halt. Institutions like CHOP, and the National Institutes of Health, 

have invested significant resources towards translational research, where we convert our progress in the labs into treatments that may save lives in the hospital. 

However, without the drugs that are known to provide cures and form the backbone 

of our armamentarium, an important link in this chain is missing which can cause 

setbacks of epic proportions. 

My goal in this testimony is to provide insight into our concerns at CHOP and 

share with you how we have responded to the drug shortages. I will close with some 

of my personal opinions on suggested solutions with the hope that they may help 

the committee in its efforts to address this pressing issue. 

Beginning with our more broad concerns, I will tell you that there are a number 

of drugs we use commonly that are either in short supply or not available. These 

include life-saving cancer drugs used in my pediatric oncology patients, anesthetics 

used during surgery, and a large number of ‘‘sterile injectables’’ used by our 

neonatologists in many of our youngest and most vulnerable patients. In response 

to these shortages, CHOP’s pharmacy developed a customized database that provides real-time information on our day-to-day supplies. The number of drugs in 

short supply at our hospital has been steadily increasing over the last few years to 

123 drugs today, most of which are generic injectables. We are monitoring 35 drugs 

with a 4 to 8 week’s supply; 9 drugs with a 2 to 4 week’s supply; and, 10 drugs 

with less than 2 week’s supply left. There are also eight drugs that we have completely run out of, forcing us to substitute potentially equally effective, but often less 

desirable, replacements. 

This list includes: 

• mitomycin injection, which is used for some surgical and ophthalmic procedures; 

• co-trimoxazole (Bactrim) injection (which is available on a compassionate use 

basis), but a commonly used antibiotic to prevent serious infections in patients with 

compromised immune systems; 

• diazepam (Valium) injection, which is used as a sedative in surgery and for seriously ill patients; 

• pancuronium injection, which is used to immobilize patients for surgery; 

• ammonium chloride injection which is used to alter the acid/base balance in 

critically ill patients; and 

• Selenium, chromium and cysteine injections, which are all used to feed patients 

intravenously. The shortage of these agents poses a particularly dire situation for 

patients, often the neonatal population, who are unable to be fed in any other manner. 
76 

All of these shortages are presenting significant challenges to our medical staff 

and can have life-threatening consequences for our patients. 

I would like to provide a recent example of how the drug shortage problem directly and seriously impacts children with cancer at CHOP, and how the consequences have a potentially dire impact in both the short- and long-term. For a 

6-week period this past summer, CHOP was unable to obtain daunorubicin, a drug 

known to be essential for the cure of childhood leukemias—the most common pediatric malignancy—and part of our standard of care for over two decades. This drug 

is a big part of why we can offer curative approaches to the majority of patients. 

We were forced to use the drug doxorubicin as a replacement, despite there being 

no data available on the safety and effectiveness of this as a leukemia therapy or 

any other replacement. We did know, however, that withholding the drug altogether 

would definitely result in a much higher risk for relapse. While it is too soon to 

know if the substitution impacted the curability of these children, we noted significantly more side effects, mainly severe mouth and gut ulcerations, fever and infections. While no child died from these complications, it is my opinion that it is only 

a matter of time before this type of tragedy will occur. You must understand that 

delivery of cancer care to children requires a highly complex infrastructure. At any 

one time, we have about 50 children receiving chemotherapy at CHOP and there 

are over 300 different cancer treatment road maps written into our electronic health 

record. Absence of a single drug requires us to rewrite the formulary and road maps 

for each patient who may receive a substitution, a procedure that is highly complex, 

resource intensive, and frankly highly subject to human error. Finally, each of the 

children who received the substitution over the summer were in the midst of a clinical trial, and we are deeply concerned that these types of deviations from accepted 

practice will impact NCI-sponsored clinical trial results. 

Another shortage we’re experiencing here at CHOP includes some ingredients 

used in total parenteral nutrition (TPN), which is a way of supplying all the nutritional needs of the body by bypassing the digestive system and dripping a nutrient 

solution directly into a vein. The intravenous compound consists of carbohydrates, 

protein, fat, multivitamins, and numerous electrolytes and minerals essential to sustain life in patients unable to ingest food by other means. Approximately 50 percent 

of the patients admitted to CHOP’s neonatal intensive care unit (NICU) have conditions such as gastrointestinal abnormalities and/or extreme prematurity, which require TPN to survive. CHOP often finds that many of the ingredients essential to 

TPN are either completely unavailable or on shortage. For some of these ingredients, such as selenium (which is one of the injectables that we are completely out 

of), there is no substitution. For others, including sodium phosphate, there are alternative agents, but these alternative agents contain other ingredients (like aluminum) that may be harmful to patients, resulting in neurotoxicity or renal failure. 

The inability to provide appropriate TPN to patients may result in inappropriate 

nutrition, leading to electrolyte abnormalities, negative developmental outcomes 

(cognitive and physical), and longer hospitalizations. In order to prevent these complications, physicians, pharmacy and nutrition staff must invest a significant 

amount of time to develop an appropriate substitution, often limited to oral supplements. However, many children cannot take these due to their illness, leaving their 

families and doctors with no alternative. The only solution to this problem is the 

return of the electrolytes and trace elements in shortage, the major components of 

TPN, back to the market. 

In most cases, we are able to address such challenges in our pharmacy. On a daily 

basis, our pharmacy purchasing staff monitors the availability of medications known 

to be in short supply nationally and enters this information into a customized database for tracking purposes. The Pharmacy has a weekly meeting of key personnel 

(supervisors, managers and clinical pharmacists) to review each shortage individually, update the status, and create a contingency plan for ongoing issues. Key physicians are contacted regarding shortages that may affect their patient population 

and plans for conservation and alternative therapies are created and implemented, 

often on an emergent basis, as there is often no notice that a medication is about 

to become unavailable. Conservation measures may require significant effort on the 

pharmacy department, in terms of re-distributing supplies, repackaging large quantities into smaller quantities, and tracking prescribers down to change orders. We 

have invested over $2 million by purchasing two ‘‘robots’’ which allow us to more 

efficiently use and repackage medications that we buy in large quantities. This allows us to stretch our supply and use every drop of a particular drug. The Hospital’s 

response is designed to help us avert disruptions in patient care while ensuring the 

safety of our patients. These resources represent a significant financial investment, 

but help us mitigate the impact of drug shortages here at CHOP. All of these processes take a minimum of three full-time CHOP pharmacy staff persons. 
77 

While these efforts have helped us address these challenges, we have not overcome them entirely. I suggest this requires a partnership between providers, manufacturers and government. This begins by making sure that information on impending shortages is delivered responsibly and in real time. S. 296, legislation introduced 

by Senators Amy Klobuchar and Casey, coupled with President Barack Obama’s Executive order, will require drugmakers to notify the Food and Drug Administration 

of shortages and this is an important step in the right direction. We need this information because the lack of notice of a medication becoming unavailable can put patients at significant risk, since many times there are not appropriate alternative 

therapies for some of these critically ill children, or those with rare diseases. Without notice, there is no time to conserve or prepare for a prolonged absence of a routinely used medication. Other critical information we need is an accurate estimate 

of re-supply dates. These are often a moving timeline that is continually being 

pushed into the future, without any target date in sight at all. Knowing when a 

medication will truly become available again would help us determine the most appropriate conservation practices. Abolishing ‘‘gray market’’ practices would also help 

assure patient safety, maximize legitimate supplies, and keep healthcare costs 

down. 

For me, as someone who spends significant effort developing new therapies for 

cancer, the paradox is quite striking. The NCI infrastructure has supported major 

advancements in recent years in the development of completely new and impactful 

treatments to cancer. However, each of these advances is built on the backbone of 

existing therapies, almost all of which are off patent at this time. It is quite striking 

that it is easier for me to get to my patients a drug discovered only recently and 

with a limited, and sometimes nonexistent, track record of curing children with cancer, but I cannot get them drugs that have been the bedrock of our curative therapies since the 1970’s. Modern cancer therapy is not a replacement of the old ways; 

it is an integration and an enhancement of established curative methods. Without 

the bedrock of established and curative drugs, recent discoveries mean many of our 

most seminal advances in the field are in jeopardy of being reversed due to this 

issue. 

I close today by commending this committee for not only investigating the issue, 

but for also helping to identify a solution for it. While I have shared insight into 

how The Children’s Hospital of Philadelphia is addressing drug shortages, I will tell 

you that our efforts have required us to be nimble and shift resources away from 

other priority child health demands, so that we may address this important problem. We have very high standards for patient care and safety and we will not allow 

this crisis to compromise that. As a pediatric oncologist, I am awestruck at how 

such an issue can so dramatically impact the children afflicted with cancer and the 

research infrastructure we have built over decades to arrive at curative therapy for 

all. As standards continue to rise, as they should, the tools that help doctors provide 

excellent patient care need to be readily available and continuously improved. These 

tools include pharmaceuticals. We must remember at the epicenter of this issue is 

the patient and I hope the information I shared will further invigorate your efforts 

to ensure that drugs are readily available for the people that depend upon them the 

most. 

The CHAIRMAN. Thank you, Dr. Maris. Thank all of you. We’ll 

begin a round of 5-minute questions. 

One thing that’s come through to me from the first panel and 

from this panel—almost every one of you talk about it—is the need 

for early warning, early information coming from the manufacturers to FDA. Mr. Neas had the ARI. Mr. Aitken, you talked about 

an early warning system. I guess those are similar concepts. Dr. 

Maris, you talked about it in your testimony, too. Dr. Crosse, in 

your findings, GAO found that. 

Somehow FDA is not getting any kind of advanced warning from 

manufacturers that they may potentially face a shortage. Is that 

correct? 

Ms. CROSSE. Yes. 

The CHAIRMAN. OK. But you point out, Dr. Crosse, that FDA 

does not have the authority to mandate this. 

Ms. CROSSE. That’s correct. Currently they have a very narrow 

authority. 
78 

The CHAIRMAN. Very narrow authority. 

Mr. Neas, maybe this is for you. Would the manufacturers voluntarily enter into some agreement with the FDA to provide upfront 

information when they expect to see a shortage? As I said earlier, 

the problem is you get two or three or four manufacturers, and 

FDA doesn’t really know what they’re all doing. If they had this 

reporting in, then FDA could take a look and see and anticipate 

whether or not there may be a shortage. 

But is this something voluntarily that they would do, or does 

FDA need some more authority to compel this type of information? 

Mr. NEAS. Mr. Chairman, many of the generic manufacturers already voluntarily supply that type of information. Having said 

that, we’re working with many members of the Senate and the 

House looking at these notification bills, and we are working with 

the members, and we want to make sure there are no unintended 

consequences, especially with respect to the gray market and violating confidentiality. 

We’re also thinking that it probably should apply to everyone in 

the supply chain, not just with respect to manufacturers. There are 

some really good ideas out there, and we just want to make sure 

that it’s framed precisely so that we can all have multistakeholder 

support. 

The CHAIRMAN. I’d like to know what that precisely is. So we 

kind of all agree they need this information one way or the other, 

but then you get to the second problem, Dr. Crosse, which you 

point out, so what does FDA do with it? They have no authority 

to tell a manufacturer you’ve got to produce more or to do something. Then what do you do with that information? 

Ms. CROSSE. We found that when FDA did get advance notice, 

they were able to be pretty effective. In the majority of instances 

where they knew about a potential shortage, they were able to take 

steps that were able to prevent that shortage from really becoming 

the full-blown kind of problem that we’re seeing with other drugs. 

The problem is that right now, the majority of the time they don’t 

know about a problem in advance. They learn about it from hospital pharmacists, from patients, from other systems that are collecting data. FDA is not finding out about it soon enough. 

The CHAIRMAN. I still wonder what they do. If they see a shortage coming, they can’t go to a manufacturer and say produce more, 

can they, Mr. Aitken? 

Mr. AITKEN. I think here also we need to differentiate the nature 

of what a shortage is. I think a manufacturer that is anticipating 

that they will reduce their production of a particular product, that’s 

one type of issue that we’ve heard talked about. 

But shortages exist because demand exceeds supply, and that’s 

why we believe actually you need to factor in the demand forecasting for perhaps a 3- to 5-year period in advance, understand 

where that incremental capacity can come from, from the various 

manufacturers. Even if an individual manufacturer may not be reducing their actual supply, there may still be a shortage. 

I think, though, this has to be grounded with the manufacturers, 

but it does have to be multistakeholder. The intermediaries are an 

important part of this as well. 

The CHAIRMAN. Mr. Neas. Dr. Maris. 
79 

Mr. NEAS. Mr. Chairman, I do want to re-inforce the accelerated 

recovery initiative that we’re talking about. FDA has so much on 

its plate, and we’re definitely supportive of increasing resources 

and addressing the crisis. 

With respect to looking at the supply schedule, that’s why we 

think this new initiative, this unprecedented private sector, nonprofit initiative where we could actually collect the necessary information and come up with an aggregated available supply of critical 

drugs and get a consolidated supply schedule, and then use this information to identify potential gaps in supply compared to the current market requirements. We think this is market-based. We 

think it comes from the industry. We know this is a variable problem, but we want to work with FDA and with everybody in the 

supply chain. 

The CHAIRMAN. Dr. Maris. 

Dr. MARIS. In terms of projecting demand, I think that at least 

in the oncology field, there are decades of data, and I think it’s 

pretty clear what the demand is going to be for most of the sterile 

injectables for oncology. 

In terms of tracking, I mean, what we do at CHOP is we don’t 

just track the manufacturers. We track at multiple points along the 

supply chain, and I think that’s been a critically important part of 

our being able to stay somewhat ahead of it and knowing more 

from the supply chain side when there’s going to be an impending 

shortage. The reason why it’s so critical is that we can make those 

alternative plans sooner rather than overnight. 

The CHAIRMAN. Thank you all very much. My time has expired. 

Senator Merkley. 

Senator MERKLEY. Thank you, Mr. Chair. 

Dr. Maris, could you comment on the impact that the stress has 

on patients when patients find out that drugs may not be available 

when they’re in the third course of treatment, or that the drugs 

may have to be switched to something else and they are not sure 

if it will work? And in general, whether it makes a difference as 

to whether a patient is able to focus their mind and heart on healing or has to focus their mind and heart on, wow, am I going to 

be able to have the drugs available? 

Dr. MARIS. Thank you for the question, and I think that the 

quick answer to your question is it’s not measureable, but it’s significant. I think that, at least in pediatric oncology, this conversation most often comes up during that incredibly horrific time of diagnosis when there is so much going on in terms of being faced 

with a child with a life-threatening illness, being faced with a 

major change in life as families know it, the reality that therapy 

is on its way, and then to hear that there is a major chink in the 

armamentarium is devastating. I don’t know how to articulate it 

any better that it is a very significant problem. 

Senator MERKLEY. And you noted often this is a time, at the beginning of treatment or diagnosis, but I’ve talked to a patient, and 

my impression is it’s not that uncommon for it to happen in the 

middle of a course of treatment as well, first starting with a delay, 

come in Thursday rather than Tuesday, and then getting calls saying we still don’t have the drugs, throwing the whole family into 
80 

chaos as to what role should they be playing in trying to track 

down appropriate drugs. 

Dr. MARIS. And there’s no doubt that the time of diagnosis is 

when families are most vulnerable, but during therapy as well. To 

have a potentially curative therapy withdrawn from being available 

to you is quite, quite difficult. And a point that I’d really like to 

make from the physician side of things and the researcher side of 

things is substitution is, at best, an inexact science. 

Senator MERKLEY. And you had noted in your testimony that in 

some ways a bullet has been dodged because there’s not an attributable death. But certainly I have an impression from medical providers in Oregon that whereas there may not be an exact correlation of saying this person died because something was unavailable, 

that many, many times, almost on a daily basis, shortages are compromising the effectiveness of treatment. Would that be fair to say? 

Dr. MARIS. I think it would be not only fair, and I’d like to expand on that by saying that I cannot pick up the medical literature 

and say this case report directly links drug shortage to a death, but 

I think all of us in the field feel that it is impacting patient safety 

and quality care quite dramatically already, and we’re just very 

concerned that this is the tip of the iceberg if we don’t do something soon. 

Senator MERKLEY. Thank you very much. 

Mr. Neas, several of us are trying to get our hands around this 

gray market. It’s clear that when there is something in short supply, there’s a temptation to try to gain a supply of it and gain as 

much as possible, increase the shortage, and then be able to sell 

at a high profit. We heard testimony earlier about a 100-fold increase. 

As I think about the pharmaceutical benefit managers, they’re in 

the business under contract to purchase drugs from the manufacturers, under contract to deliver. Are there some PBMs that appear 

to be in the business of buying extra amounts, hoarding them, raising prices, or is it the impression that really, no, this would never 

happen within the official system? We’re talking about third-party 

players who are coming in to try to gain these supplies and then 

sell them at horrifically increased prices. 

Mr. NEAS. Senator, I’m not aware of any incidents within the 

pharmacy benefit managers. I do want to echo, however, what you 

have said, and Senator Blumenthal and others. It’s truly an outrageous situation. As some of you know, I’ve just completed my 

third month as the new CEO. But in my first week, I had a chance 

to attend the FDA workshop on drug shortages, and there were repeated references to the gray market. But no one could really get 

a good handle on how much of a problem it was. 

My very first question after my presentation when we were in 

the panel was who has jurisdiction? Who is invested by the law, 

by Congress? Is it the FTC? Is it Department of Justice? Who has 

responsibility? I’m not sure any of us have gotten the real response 

as to the extent of the problem, who is responsible, and who should 

be investigating and enforcing. I think it’s a major issue. 

Senator MERKLEY. One doctor told me that his institution refuses 

to pay these inflated prices. But then families, when the institution 

can’t acquire the drug, are searching the country over the Internet, 
81 

so on and so forth, trying to find the drug for their ill family member, and I want to echo what you just said. It’s absolutely unacceptable. Certainly I want to work with all my colleagues and work 

with you all and the industry on how can we stop this drug scalping, which aggravates existing shortages. To me it’s absolutely unacceptable. And so I hope to get your help, all of your help, in finding a way to address this. 

Yes, doctor? 

Dr. MARIS. I just want to add that there’s been a lot of discussion 

about who this gray market is, and I don’t know why it’s a mystery. I mean, we get faxes every week, and we just shred them. 

But, I mean, you can have them. 

Senator MERKLEY. Thank you. I would appreciate if you could set 

aside a week’s supply, and it appears that there’s a gap here as 

we’re hearing the testimony. It seems like there’s a gap in terms 

of no one having accountability. It hasn’t become the FDA’s role to 

investigate this and take it on. Apparently, attorneys general 

haven’t taken it on, perhaps because it’s not a crime. 

But we have to fill this gap, and I think that’s a very valuable 

insight coming out of this committee, and we have to devise a way, 

if it’s not illegal, to make it illegal and to end this practice. 

I thank you all very much. 

The CHAIRMAN. Thank you, Senator Merkley. 

Well, there is a former attorney general who is focused on this. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you, Mr. Chairman, and my thanks 

again for having this hearing and all of your excellent testimony. 

Dr. Maris, it may be no mystery, but the problem is there has 

been no real investigation. That’s the very simple answer to a doctor, talking to you as a former attorney general. But as a lawyer, 

some of these practices are quite clearly against the law, existing 

law. This kind of anti-competitive misuse of market dominance fit 

almost a textbook case for an FTC or Department of Justice investigation. And so I would take your comment as further support for 

it. 

Mr. Neas, I first want to thank you for your very distinguished 

work in the area of consumer protection, as well as civil rights and 

civil liberties, and welcome your proposal, which I think is helpful 

in advancing the debate or discussion. Simply to think of a team, 

a SWAT team as you called it, that would be more proactive and 

interventionist, aggressive in this area I think is a welcome initiative. 

My question to you is whether the FDA really has sufficient authority now to make the SWAT team effective. The concept may be 

good, but you’ve heard the GAO report, Dr. Crosse in particular, 

talk about what the FDA cannot do now. And so I wonder whether 

your team proposal wouldn’t call for more authority on the part of 

the FDA. 

Mr. NEAS. That’s a good question, Senator. I’m not sure of the 

answer. I know something has to happen. We’ve heard about the 

backlog and the shortage problem, and the FDA needs so much 

help. They’re so good, but they need so much help, just materials 

from the Office of Generic Drugs. The median approval time of an 

abbreviated new drug application is now 30 months for a new drug 
82 

application. That’s 65 percent higher than 4 years ago. There are 

now 2,000 abbreviated drug applications that are over 180 days, 

2,000, another 600. 

They need personnel. They need prioritization. There’s got to be 

more coordination. I think the SWAT team approach—Drug Shortage does an unbelievable job. But we were told we went from three 

or four to seven or eight, or eight or nine. 

When you stated the question about the nature of the crisis, I 

think the response of the multistakeholder collaboration, its intensity should match or exceed the nature of the crisis. If this is this 

kind of a crisis, I think eight people at Drug Shortage is far fewer 

than they need. 

And by the way, we have worked with FDA on the PDUFA bill, 

which will be before you all. And Senator Harkin, Mr. Chairman, 

we’ve talked about it one on one. It is going to be an enormously 

consequential legislative measure, providing 800 or 900 more inspectors with respect to facilities inspections, but it’s also going to 

help with the abbreviated drug problem, the application and approval problem. 

But there’s got to be that coordinated prioritization. And I’m not 

saying there’s not talk in meetings and prioritization. I think it has 

to happen on a far higher level with much more intensity and effectiveness. 

Senator BLUMENTHAL. I thank you for that answer, and I agree 

with you on your comments about the staff shortage. 

Dr. Crosse, let me ask you, your report says that the drug shortages—and I’m going to quote exactly the line—‘‘65 percent of shortages involve drugs that were in short supply more than once.’’ Does 

that mean that the same drug was in short supply more than one 

time; in other words, repeated times? I would read the plain 

English as saying that. 

Ms. CROSSE. Yes, that is what we mean. Many of these drugs 

have been in short supply multiple times over the last decade. 

Some of the drugs that we looked at in detail had been in short 

supply as many as five times. 

Senator BLUMENTHAL. It isn’t as if there’s a short supply, there’s 

a manufacturing problem, the FDA comes in, offers friendly advice, 

the problem is fixed, no problem again. These are chronic, repeated 

shortages. 

Ms. CROSSE. In some instances, they are. All of the 15 drugs that 

we looked at in depth, I think there were only four of them that 

had not been in short supply multiple times across the last decade. 

Senator BLUMENTHAL. One last question, and thank you for your 

great work on this report. You say that, again in the report, that 

over half—and I’m quoting—‘‘over half of shortages reported during 

the relevant time period were in generic injectable drugs.’’ As others have commented here, a substantial percentage were not in 

that category. Do you know the percentage? 

Ms. CROSSE. We do have information in the report. I’d have to 

sit here and add those numbers up, but we do have a figure in the 

report that lays that out. The injectable drugs that were available 

only in generic form, 53 percent. An additional 15 percent of 

injectable drugs were available only in brand name forms. Then 

there were 16 percent that were orally administered drugs avail-
83 

able in generic form. That could be generic and brand name. And 

another 4 percent were orally administered drugs available only in 

brand name form. And then there were 12 percent of other types 

of drugs that were topicals and other sorts of things. 

Senator BLUMENTHAL. I would like to have an opportunity for my 

staff to contact you and verify those numbers. And also, since I’m 

out of time, I can’t ask this question. But I’m interested in why the 

FDA does not have sufficient authority now to require notification 

of a drug shortage under 506(c) of the Federal Food, Drug and Cosmetic Act. I gather it is requiring some kind of notification, and 

why it does not have sufficient authority now. 

Ms. CROSSE. Right. The current authority only relates to where 

there’s a sole supplier of a drug, and that drug has to be life-supporting, life-sustaining, or to prevent a debilitating disease or condition. It’s a narrow set of drugs that are covered by the current 

authority. 

Senator BLUMENTHAL. Is that as a matter of regulation? 

Ms. CROSSE. That’s their statutory authority. 

Senator BLUMENTHAL. OK. Thank you very much. 

Thank you again to the entire panel. You’ve been very helpful. 

The CHAIRMAN. Senator, I think Mr. Neas wanted to respond to 

this. 

Senator BLUMENTHAL. I’m sorry. 

Mr. NEAS. Mr. Chairman, thank you so much. I just need 30 seconds. Is that all right? 

The CHAIRMAN. Absolutely. 

Mr. NEAS. This accelerated recovery initiative, which is brand 

new in terms of being announced today, the multistakeholder approach that people have been talking about, I do want you to know 

that Premiere, one of the group purchasing organizations, has come 

out for it today, and I believe there could be a number, maybe all 

of the group purchasing organizations. We’ve had pharmacists, hospitals, American Cancer Society. I’ve also met with John Castellani 

about working together on drug shortages. 

I’m just making a point to demonstrate momentum, but most importantly the multistakeholder collaboration within the industry, 

but also with FDA, with you all, and with the executive branch. 

Senator BLUMENTHAL. I would welcome that cooperation as we 

move forward. Thank you very much. 

Thank you, Mr. Chairman. Sorry to go over my time. 

The CHAIRMAN. Oh, that’s fine, Senator Blumenthal. 

Senator Casey. 

Senator CASEY. Thank you, Mr. Chairman. I know we’re at the 

end of the hearing, and I apologize for my back and forth here. 

The CHAIRMAN. Oh, no. Please. 

Senator CASEY. It’s been one of those days. 

Doctor, and I know our other witnesses—I’ll make sure that I 

submit questions for the record. I’m grateful for your work and the 

scholarship and the advice that you give to us. But I wanted to 

start with Dr. Maris, and I’ll be rather brief. 

I know that Children’s Hospital in Philadelphia has invested a 

tremendous amount of time and resources trying to manage this 

problem and trying to deal with it directly, and I guess I’d ask you, 

because I know you’ve got a technological infrastructure and other 
84 

means to help track these shortages, but what advice can you give, 

if any, that’s relevant to a smaller entity, a smaller hospital or hospital system or in a community where they may not have the IT 

resources, they may not have the opportunity to invest in the way 

that you have? Any kind of common practices that would prevail, 

no matter what the level of investment or resources, that you could 

give us some advice about? 

Dr. MARIS. Thank you for that question. I’ll answer it two ways. 

The first answer is that it’s very difficult and may not be practical 

for many smaller institutions to do what we’ve been able to do. 

That was one of the points I wanted to get across is that we’ve 

been able to address this issue, but many places may not be able 

to. 

In terms of tangibles that we can share, there’s no doubt that the 

grassroots tracking system that we put into place, the databasing, 

is already being shared amongst the pediatric, the Children’s 

Health Care Association and the major children’s hospitals. But 

how we can trickle that down to all the children’s hospitals is 

something that we have not addressed yet. 

Senator CASEY. And we’ll try our best to be able to provide that 

kind of feedback. 

One of the main purposes of the legislation that Senator Klobuchar and I and a whole host of others have been working on is 

to provide that early warning system in place that several of our 

witnesses today have spoken to, in one kind or another. 

I want to make one point for the record. I’ll just state this and 

then conclude. 

There’s been some talk about the causes here, and I noticed that, 

Mr. Neas, in your testimony about why this is happening, you say 

in your testimony that there are multiple reasons, but insufficient 

supply of available raw materials is one you cite, inadequate or delayed communications about shortages, and I know the GAO report 

cites a number of manufacturing-related causes. 

I think there’s been some indication in Washington here that 

folks are pointing to price and reimbursement. I think we got a— 

especially in light of your testimony, how important that was to 

have you outline what the causes are, not some of the things we’ve 

heard from folks here in Washington. That’s an important point 

that you made to help us better understand not just the causes but, 

therefore, some of the solutions. 

I know we’re wrapping up, and I’m just grateful that you gave 

us this time and bring to us your expertise. Thank you. 

The CHAIRMAN. Any last thing from any of our witnesses before 

we adjourn for the day? 

[No response.] 

If not, I also thank you all very much for your work in this area, 

your leadership, and for being here today. 

I think we got good testimony today from both this panel and the 

previous panel. It is a complex problem, but I don’t think it’s 

unsolvable. 

I thank you all very much. The record will remain open for 10 

days for Senators to submit any other comments or questions. 

And with that, the committee will stand adjourned. Thank you. 

[Additional material follows.] 
85 

1 Regulatory and Legislative Recommendations from the Drug Shortages Summit Steering 

Group. Drug Shortage Legislative-Regulatory Work Group: American Society of Anesthesiologists et al. November 5, 2011. http://www.ashp.org/drugshortages/summitreport. 

ADDITIONAL MATERIAL 

PREPARED STATEMENT OF JERRY A COHEN, M.D., PRESIDENT, AMERICAN SOCIETY OF

ANESTHESIOLOGISTS; AND ARNOLD J. BERRY, M.D., M.P.H., VICE PRESIDENT FOR

SCIENTIFIC AFFAIRS, AMERICAN SOCIETY OF ANESTHESIOLOGISTS

On behalf of the over 48,000 members of the American Society of Anesthesiologists (ASA), we would like to thank Chairman Harkin and Ranking Member Enzi 

for holding a hearing regarding drug shortages on December 15, 2011, and allowing 

ASA the opportunity to submit a statement for the record. We greatly appreciate 

your willingness to bring this important topic before the Senate Committee on 

Health, Education, Labor, and Pensions and for your efforts to address this issue. 

As the recognized leader in patient safety, anesthesiologists are seriously concerned about the toll drug shortages are having on our patients. In April 2011, ASA 

conducted a survey of 1,373 anesthesiologists to quantify the impact of drug shortages on our patients and practices. Our survey results demonstrated that as a result 

of drug shortages, 51 percent of anesthesiologists altered a procedure in some way, 

48 percent felt shortages resulted in a less optimal patient outcome, 48 percent reported longer operating room or recovery times and 10 percent postponed or cancelled procedures. While these numbers may be alarming they pale in comparison 

to the 98 percent of anesthesiologists who experienced a drug shortage during the 

past year, or the 90 percent of anesthesiologists that reported a shortage of 1 or 

more drugs at the time of the survey. 

One of the most common drugs for which anesthesiologists reported a shortage 

is propofol. In fact, 88 percent of anesthesiologists reported experiencing a shortage 

of this drug. For anesthesiologists, propofol is one of the most commonly used drugs 

for the induction of anesthesia or for providing sedation. Other drugs used for these 

purposes may result in less than optimal patient outcomes including prolonged 

awakening, longer stays in recovery prior to discharge and increased nausea and 

vomiting. While anesthesiologists are trained to safely use multiple drugs, and can 

often find alternatives for drugs in short supply, these shortages can cause decreased patient satisfaction (prolonged awakening, delayed discharge, nausea) or adverse outcomes, including death in extreme situations (e.g., trauma patients, unstable hemodynamics, airway emergencies). 

In November 2010, ASA along with the American Society of Clinical Oncology, the 

American Society of Health-System Pharmacists, the Institute for Safe Medication 

Practices and the American Hospital Association co-convened a Drug Shortage 

Workshop Summit. 

This Drug Shortage Summit Steering group, consisting of the co-conveners, manufacturers, distributors and group purchasers, released initial findings and continued 

to meet over the course of the next 10 months producing a series of five recommendations for regulatory and legislative action. The work group made the following recommendations.1

1. Reallocate resources within FDA and for the Congress to authorize and appropriate funding for FDA activities that prevent or mitigate shortages. 

2. Require manufacturers to report product discontinuations and manufacturing 

interruptions 6 months in advance or upon determining that production will not 

meet average historical demand. Establish communications methods to provide accurate and timely information to health care providers. Establish methods to better 

predict the seriousness and duration of drug shortages. 

3. Establish criteria for determining whether a drug is vulnerable to shortage. 

Designate drugs that are vulnerable to shortage as part of the FDA approval process. Establish appropriate incentives for manufacturing redundancies or other 

means of producing emergency supplies for drugs that are deemed vulnerable to 

shortages. The pharmaceutical industry should collaborate with regulatory and legislative entities to identify these incentives. 

4. Require collaboration between the FDA Center for Drug Evaluation and Research divisions and the Attorney General to establish a process that would expedite 

the increase in manufacturing production quotas when needed in response to drug 

shortages of controlled substances. 

5. Leverage current FDA pathways to expedite the approval process for medically 

necessary unapproved drugs that are vulnerable to shortages without compromising 

the safety of the drug. 
86 

2 Cherici, Coleen; Patrick McGinnis and Wayne Russell. Buyer Beware: Drug Shortages and 

the Gray Market. Premier Inc. August 2011. http://www.premierinc.com/about/news/11-aug/ 

Gray-Market/GrayMarket-Analysis-08152011.pdf. 

While drug shortages are an issue for patients and physicians, shortages also negatively impact health care costs. Drug shortages have resulted in significant price 

increases and have often caused providers to search alternative sources to obtain 

critically necessary drugs. In a recent study, Premier found that the average markup on a drug sold in the grey market is 650 percent. However, for propofol the average markup is a startling 3,161 percent.2 Anesthetic drug shortages can increase 

procedure and recovery times as a result of anesthesiologists being forced to select 

alternative therapies, as well as increase societal and health system costs for cancelled or postponed cases. At a time in which Congress and the Administration are 

focused on reducing health care expenditures and maximizing patient safety, quality 

and satisfaction, drug shortages present a considerable obstacle to these important 

objectives. 

Anesthesiologists are end users of drugs and need to be better informed about 

drug shortages and the duration of the shortages. We are pleased to see that Congress and the Administration recognizes the need for provider notification and has 

taken steps to address this issue. 

Recently, the Administration has taken a number of steps to combat drug shortages. On October 31, 2011, President Obama issued an Executive order that would 

quicken the review process for applications to start or change production of drugs 

in shortage, widen the reporting of shortages and expand notifications of shortages 

and sharing relevant information regarding possible price gouging with the Department of Justice. We commend the Administration for their efforts. These are important steps to address drug shortages, and we fully support them. 

Also, we fully support and thank Senator Amy Klobuchar for introducing the bipartisan Preserving Access to Life-Saving Medications Act (S. 296), which would require drug manufacturers to notify the Food and Drug Administration if there is 

an interruption in manufacturing that could lead to a drug shortage. Currently, the 

Senate version has 20 cosponsors and continues to gain support. We strongly urge 

Congress to pass this legislation during the 112th Congress. 

In addition, ASA looks forward to working with Senator Hatch as he develops legislation to address drug shortages, and we look forward to working with all members of the Senate Committee on Health, Education, Labor, and Pensions to address 

this issue. 

Again, thank you for holding such an important hearing on an issue that if addressed properly can improve quality of care for our patients. 

DEPARTMENT OF HEALTH & HUMAN SERVICES, 

FOOD AND DRUG ADMINISTRATION, 

SILVER SPRING, MD 20993, 

March 27, 2012. 

Hon. TOM HARKIN, Chairman, 

Committee on Health, Education, Labor, and Pensions, 

U.S. Senate, 

Washington, DC 20510. 

DEAR MR. CHAIRMAN: Thank you for providing the opportunity for the Food and 

Drug Administration (FDA or the Agency) to testify at the December 15, 2011, hearing before the Committee on Health, Education, Labor, and Pensions entitled ‘‘Prescription Drug Shortages: Examining a Public Health Concern and Potential Solutions.’’ We are providing responses for the record to written questions from certain 

members of the committee sent to us by committee staff on January 19, 2012. 

If you have further questions, please let us know. 

Sincerely, 

JEANNE IRELAND, 

Assistant Commissioner for Legislation. 
87 

RESPONSE TO QUESTIONS OF SENATORS CASEY, BLUMENTHAL, ENZI, BURR, AND

HATCH BY THE FOOD AND DRUG ADMINISTRATION

QUESTIONS OF SENATOR CASEY

Question 1. Some people have suggested that drug shortages are, at least in part, 

related to changes in regulatory actions and standards, as well as increased enforcement, on the part of the FDA. For example, some have suggested that the FDA is 

now requiring manufacturers, in particular sterile injectable manufacturers, to meet 

higher levels of quality for processes and products than it did over the past few decades. Can you comment on whether the FDA Good Manufacturing Practices (GMPs) 

or other standards have changed with respect to sterile injectables? Have the 

amount of resources, or the priority that FDA has placed, for enforcement of GMPs 

and other standards increased in the past few years for sterile injectables? Finally, 

can you comment on whether technology has changed over the past decade in a 

manner that allows the FDA and/or manufacturers to track the purity of drugs, or 

the quality of drug products and manufacturing processes, in a way that was not 

previously possible? 

Answer 1. The trend of increased drug shortages does not correspond to an increase in regulatory requirements. FDA does everything in its power to prevent and/ 

or mitigate drug shortages, including exercising regulatory flexibility. FDA carefully 

considers the impact of any drug shortage on patient care and access before taking 

any enforcement action. 

There have been no recent major changes to the Current Good Manufacturing 

Practice (CGMP) regulations that would substantially impact drug product manufacturing, including sterile injectables. The CGMP regulations for finished pharmaceuticals are the minimum standard by which drugs must be manufactured, and are 

written to be flexible and adaptable to newer manufacturing technologies and analytical techniques. The CGMP regulations ensure that consumers have drugs made 

with the correct ingredients, have been processed in a controlled manner to ensure 

delivery of the safe and effective amount of the active ingredient, are free of harmful 

contamination, and will remain safe and effective throughout the labeled shelf life. 

In September 2008, FDA finalized minor changes to its CGMP regulations for 

aseptic processing to incorporate a long-standing, enforced Agency interpretation, 

and there were no significant objections to this revision. FDA’s ‘‘Guidance for Industry, Sterile Drug Products Produced by Aseptic Processing—Current Good Manufacturing Practice,’’ was last revised in 2004 using a public notice and comment process 

and was well accepted by manufacturers at the time of finalization. Note that FDA 

guidance documents represent the Agency’s current thinking on a topic. Guidance 

documents are not mandatory and do not operate to bind FDA or the public; alternative approaches may be used if the approach satisfies the requirements of the applicable statutes and regulations. We are unaware of any changes to private or 

other standard-setting organizations, including the United States Pharmacopeia, in 

a way that imposes a higher-quality level on sterile injectable drugs. 

Sterile injectable drug manufacturing operations are vulnerable to microbiological contamination and require more complicated controls and equipment. For many 

years, due to heightened patient safety concerns, FDA has made such drugs a higher-inspection priority, but there have been no recent changes to the FDA inspection 

program for sterile injectable manufacturing operations. 

FDA has exercised substantial regulatory flexibility in working with firms experiencing CGMP problems to help them identify and resolve quality problems and get 

their drugs back to market as expeditiously as possible. Sterile injectable drugs 

have unique manufacturing and market features, which make shortages of these 

products more likely to occur and harder to prevent or mitigate. These include: 

• Manufacturing operations are complicated to control and more vulnerable to 

problems that affect safety (e.g., microbiological contamination); 

• Dedicated manufacturing lines are often required; 

• The top three generic injectable manufacturers hold 71 percent of the market 

for generics, by volume; 

• Most sterile injectables have one manufacturer that produces at least 90 percent of the drug (innovator and generic combined); and 

• ‘‘Just-in-time’’ manufacturing and inventory practices leave little margin for 

error. 

Technology has improved over the past decade in the area of sterile drug product 

processing and test methods, but not all advances have been widely adopted. Methods to measure air quality and microbiological contamination in the manufacturing 

environment now permit more consistent and rapid detection of these types of hazardous contamination. Automated methods to detect and quantify foreign particles 
88 

in sterile injectable liquids have also improved over the past decade, although such 

methods are not in common use and are not required by FDA. The quality standards in such areas allow for minor variations, so improvements in detecting such 

contamination would not necessarily result in a greater number of batch failures or 

disruption to manufacturing capacity. 

The past two decades have also seen improvements in preventing objectionable 

contamination in sterile injectables. Processing methods increasingly incorporate 

equipment and techniques designed to reduce contamination—microbiological and 

other—in sterile injectables. Many of the processing advances decrease the amount 

of operator access—a primary source of microbiological contamination—to the critical processing areas where vials are open to the environment. FDA has encouraged 

manufacturers of sterile injectables to adopt processing methods that improve sterility assurance. Together, these advances represent important steps forward in improving the quality of manufactured products. 

Question 2. In your testimony you note that of the 127 drugs in shortage that the 

FDA tracked during 2010–11, 43 percent were innovator drugs. I assume that by 

innovator drugs, you mean brand name drugs (i.e., drugs that are still under patent). I thought that it was interesting that more than two in five drugs in shortage 

were innovator drugs given that we have heard some people say that low reimbursement is one of the causes of drug shortages. But if a drug is still on patent, its manufacturer can really charge whatever price it needs. Does that imply that the causes 

of drug shortages are more complicated than just pricing or reimbursement, and if 

so, to what causes do you attribute the shortages among innovator drugs? 

Answer 2. Yes, the causes of drug shortages are more complicated than pricing 

or reimbursement. The main causes of drug shortages for the past 2 years are similar for both innovator (brand name) drugs and generic drugs and have included: 

• Problems at the manufacturing facility (43 percent of drugs in shortage tracked 

from January 2010–August 2011); 

• Delays in manufacturing or shipping (15 percent of drugs in shortage tracked 

from January 2010–August 2011); and 

• Active pharmaceutical ingredient shortages (10 percent of drugs in shortage 

tracked from January 2010–August 2011). 

In our experience, the factors that contribute to drug shortages, both innovator 

and generic drugs, generally include: 

• Industry consolidation and limited capacity (many innovator products are made 

by contract manufacturers that make multiple drugs on the same manufacturing 

lines and the capacity is often limited); 

• Difficulty in producing a given drug; 

• Quality and manufacturing problems (in some cases facilities have not been upgraded appropriately, equipment has not been maintained properly, and appropriate 

quality systems are not in place); 

• Unanticipated increases in demand; 

• Inventory and distribution practices (which may lead to regional shortages); and 

• A business decision to discontinue manufacturing the product (e.g., in favor of 

producing a more profitable drug or because the product is not profitable). 

Discontinuances caused 8 percent of shortages in 2010 and 2011 and have usually 

involved older sterile injectables that were discontinued for business reasons, such 

as to make production room for a different, more profitable product. Economic factors may also influence a firm’s decision to not maintain their facilities and quality 

systems adequately. For example, manufacturers may continually decrease idle time 

for their manufacturing lines, running them in production mode continuously. This 

practice puts stresses on the production equipment and makes little time available 

for maintenance and repairs. 

Question 3. In your testimony you note that in 4 weeks following the issuance of 

the President’s Executive order, you received a sixfold increase in notifications from 

manufacturers. Can you comment on whether the types of things that you were notified about were materially different from previous notifications? Are you now hearing from a broader group of manufacturers? 

Answer 3. Yes, we are hearing from a broader group of manufacturers. However, 

the types of issues that manufacturers notify FDA about have not substantially 

changed and include the following: 

• Quality defects or other problems they are experiencing that are causing actual 

or potential shortages; 

• Requests for expedited review of changes in manufacturing, new manufacturing 

sites, new suppliers, or other changes; 
89 

• Delays or temporary unavailability for any reason; 

• Potential shortages for any reason, with requests that the normal importation 

process be expedited for their approved raw materials or approved finished goods. 

Question 4. In your testimony you note that the FDA is assessing commercial systems that could be contracted to provide ongoing or periodic data on sales and distribution of drugs at the wholesale level to detect early signals of potential shortages or supply disruptions. Can you comment on the FDA’s current ability to—at 

a bird’s eye view—identify and track shortages? Can you further describe efforts underway to identify such a commercial system and what types of conversations you 

are having with manufacturers and distributors about such an initiative? Do you 

have an estimate of what types of resources would be required to execute such contracts? 

Answer 4. FDA’s Drug Shortage Program is currently able to track and monitor 

shortages and potential shortages that are reported to us. What we are trying to 

ascertain is whether there are ways we might track and monitor factors that could 

predict products or facilities that are at high risk for leading to drug shortages. To 

date, we have not identified any commercial sources for these types of data. We are 

also aware of academic centers working on development of such data, but their efforts have not yet yielded useful information, either. Therefore, we have begun to 

examine our own sources of data, such as records of facility inspections and other 

compliance activities, to determine whether any factors alone or in combination are 

predictive enough to serve as a bellwether. This process is extremely labor-intensive 

and data must be compiled manually. 

Data from wholesalers and distributors may provide signals that a shortage is already underway; however, we prefer to have notification of shortages or potential 

disruptions in supply from the manufacturers themselves so that we can offer assistance, before the shortage reaches the wholesalers and distributors. Therefore, 

FDA has continued to encourage manufacturers to notify the Agency of any shortage 

or potential disruption in supply. In addition, on December 19, 2011, FDA issued 

an Interim Final Rule (effective January 18, 2012) that expanded the circumstances 

required to be reported to FDA related to ‘‘discontinuances.’’ 

In February 2012, FDA issued a Draft Guidance, explaining the amendments to 

the implementing regulations published as an interim final rule on December 19, 

2011 (effective January 18, 2012). It provides guidance to industry on voluntary notification to FDA of issues that may result in a shortage or potential disruption in 

supply of a prescription drug or biological product in the U.S. market, regardless 

of whether mandatory notification is required under section 506C. 

Question 5. In your recommendations you note that the FDA has doubled the 

number of staff to help alleviate drug shortages. Since the Drug Shortage Program 

is currently housed within the Center for Drug Evaluation (CDER), can you comment on how this work is funded? Is any funding drawn from user fees? 

Answer 5. The additional staff are predominantly on temporary assignment from 

their positions in a number of offices from across CDER. This allows us to assess 

how best to plan for hiring of permanent positions, while we address current shortage prevention and mitigation. These staff positions are funded in part by user fees 

and in part by appropriated funds. 

Question 6. Can you comment on the broader resource needs at the FDA (e.g., 

technological, infrastructure, or otherwise) for appropriately preventing, identifying 

and tracking, and managing and resolving drug shortages? Would it be preferable 

to establish a separate Center for Drug Shortages and directly fund that entity so 

that it can appropriately staff itself and make much-needed investments in technology for tracking drug shortages, as identified in the recent GAO report? 

Answer 6. The Drug Shortage Program (DSP) has grown from 3 full-time staff 

members in 2010 to 11 full-time staff members in February 2012. DSP coordinates 

tracking and responses to prevent and address shortages. DSP creates a team of experts throughout the Agency for each shortage issue. The specific disciplines involved in each shortage team vary, depending on the issues involved and can involve 

physicians, chemists, microbiologists, manufacturing and compliance experts, and 

many others. It is important to note that not all shortages can be prevented or resolved quickly due to the significant safety and quality issues that may be involved. 

However, in all cases, FDA utilizes a team of experts and employs all available tools 

to prevent and address the shortage or disruption in supply. 

Relocation of the DSP outside of CDER would not improve tracking or the Agency’s response to drug shortages. DSP’s presence within CDER greatly facilitates its 

ability to effect collaboration in addressing and preventing shortages. There is a 
90 

large pool of experts within CDER, called upon to assist with drug shortages, and 

DSP engages other offices outside of CDER when necessary. 

Question 7. Can you comment on specifically how the Drug Shortage Program 

(DSP) works with others within the FDA, including the Office of Commissioner, to 

ensure that drug shortages are prevented as much as possible, and resolved as 

quickly as possible? What sort of coordination and communication occurs between 

DSP and different relevant centers at the FDA, and how regularly does it occur? 

What barriers stand in the way of achieving better coordination and communication 

within the FDA? As Mr. Neas shared in his testimony, the generic pharmaceutical 

industry strongly encourages the establishment of a high-level FDA drug shortage 

management team, which would include representation from key agency offices. 

What do you think about this proposal? 

Answer 7. FDA is committed to prevent and address drug shortages. CDER works 

diligently to coordinate across all offices to resolve drug shortages expeditiously. 

DSP works closely with CDER’s Office of Compliance (CDER/OC), Office of Generic 

Drugs (OGD), and Office of New Drug Quality Assessment in an effort to prevent 

or mitigate drug shortages. Communications between various offices within CDER 

regarding shortages occurs daily. This includes communications between DSP, 

CDER/OC, and the review divisions. That said, we know we can always improve and 

we have a Drug Shortage Network in place with key individuals assigned to work 

on shortage issues in each of these offices so that timely communications occur within CDER and between CDER and other offices and Centers as needed, regarding 

shortages. CDER also engages FDA’s Office of Regulatory Affairs (ORA) to coordinate domestic and international investigations and inspections as necessary. The Office of the Commissioner is also involved to provide policy guidance and analytic assistance as needed by CDER. 

Communications between Centers regarding shortages occurs when a shortage 

issue affects more than one Center. This occurs rarely and could involve, for example, a manufacturer experiencing quality issues that involve veterinary drugs, 

human drugs, and vaccines. This example would involve three Centers in FDA, and 

the shortage programs in all three Centers would work together to coordinate all 

actions and responses to the shortage. The shortage programs in the different Centers have shared best practices and continue to do so. 

FDA continues to improve coordination and communication, both within CDER 

and with other parts of the Agency. For example, FDA formed an additional working group to concentrate efforts on improved communications and coordination by 

and between ORA district offices and CDER. Additionally, we have identified dedicated Drug Shortage Coordinators in each ORA District Office. These coordinators 

will facilitate communications with the Center, which, in turn, increases the number 

of early notifications to CDER that firms are planning to cease or slow production 

or are experiencing significant quality problems that could lead to a shortage. 

A high-level drug shortage management team is thus already in place and includes the Drug Shortage coordination staff as well as a high-level team of experts 

from across FDA who possess the specific knowledge and skills needed to help address and prevent shortages. The current structure allows us the flexibility to adapt 

to changing circumstances, while still ensuring communication and coordination. 

Question 8. Can you comment on how well the FDA has been able to develop and 

institutionalize a comprehensive and cross-center strategic plan to address drug 

shortages that will hopefully, over time, help to reduce the number of shortages? 

Answer 8. DSP has an established network of experts involved in shortage management and prevention. This team includes individuals from across the Center and 

involves compliance/manufacturing experts, chemists, microbiologists, toxicologists, 

and clinicians who are called upon to assist with addressing and preventing shortages. FDA has established a Drug Shortage working group to continue to investigate 

the causes and solutions to shortages and to improve communications between the 

various components of the Center as well as between the field offices and the Center. 

QUESTIONS OF SENATOR BLUMENTHAL

Question 1. Dr. Kweder, what type of data is FDA keeping about these shortages 

and their efforts to mitigate such shortages? Why are these shortages lasting for, 

on average, 9 months? What actions are taking place during those 9 months to mitigate the shortage? 

Answer 1. FDA developed a database to track the numbers of shortages, the types 

of products in shortage, the reasons for the shortages, and the FDA actions taken 

to help resolve and prevent the shortages. FDA re-assesses all shortages and poten-
91 

tial shortages daily and is doing all that we can within our authority to prevent and 

address shortages. 

Some shortage problems, such as loss of a manufacturing site or severe manufacturing or quality problems that could pose a considerable risk to patient safety, may 

take firms significant time to resolve. If there are no other manufacturers able to 

increase production of the product quickly (usually due to capacity limitations) or 

available product for import, then more time may be required while the original 

manufacturer works to address the quality problem and bring the product back online. However, if there are ways that FDA is able to help, such as assisting with 

a quality problem when there is not a significant risk for patients, or expediting review of changes in manufacturing sites, suppliers or processes, these issues can be 

addressed quickly, sometimes in days or weeks. An example of this is a potassium 

phosphate injection that had particulate matter in the vials. The firm was able to 

show with data submitted to FDA that the particulate matter could be successfully 

removed by a filter and the drug was able to be shipped with the filter and instructions for pharmacists to use the filter with the drug to prevent risks for patients. 

The review of this issue was completed within days after receiving the proposal from 

the firm. 

In cases where a long-term shortage is anticipated, FDA searches for firms that 

manufacture drugs for foreign markets and would be willing and able to temporarily 

import a drug that could help meet critical patient needs. Temporary importations 

have occurred for nine drugs over the past 2 years. Five of those drugs are currently 

being temporarily imported. FDA evaluates the drug available in the foreign market 

to ensure there are no significant safety problems for U.S. patients and that it is 

made in a manufacturing site that meets FDA standards. FDA is not always able 

to find a firm willing and able to import to address a shortage; however, it is something that we explore when there is a long-term shortage of a critically needed drug. 

Question 2. Dr. Kweder, what is the relationship between shortages in the United 

States and abroad? Are the same shortages felt internationally, generally? Or is the 

United States in a unique position? 

Answer 2. FDA is working closely with other regulatory authorities in Europe, 

Australia, the United Kingdom, and Canada on existing drug shortage problems, as 

drug shortages are not unique to the United States, but are a global problem. For 

example the recent Doxil shortage has affected Europe, Canada and the United 

States. During our discussions with international regulatory agencies, crucial information regarding the availability of important drug products and potential alternate 

facilities is shared. Additionally, when quality problems, manufacturing constraints, 

or limited production capacity trigger a shortage, FDA and other regulatory authorities exchange information regarding the issues identified or leading to the drug 

shortage. These regulatory authorities then communicate, when necessary, with industry to explore options that will best address patient needs. 

QUESTIONS OF SENATOR ENZI

Question 1. What is the average and range for how long it takes to get FDA approval for a manufacturing facility change? Please provide specific examples where 

FDA met the 6-month goal. 

Answer 1. The 6-month goal you reference relates to applications for manufacturing facility changes that require prior approval. Under the Prescription Drug 

User Fee Act (PDUFA), FDA committed to reviewing 90 percent of such supplements within 6 months. In fiscal year 2011, FDA reviewed 98 percent of these supplements in 6 months, exceeding the goal agreed to with industry. 

FDA does not track the specific data you requested; however, the time it takes 

for approval of a manufacturing facility change will depend on several factors: 

• whether the new site has ever been inspected; 

• whether the new site has any quality problems that have been identified; 

• location of the site, since an overseas inspection may take longer to schedule 

due to current resource constraints; 

• whether the site makes similar drugs for the U.S. market; 

• whether the application for the change contains all of the information needed 

to review the change (sometimes applications are missing essential data). 

Depending on the type of facility change, sometimes these changes can be submitted as ‘‘change being effected (CBE)-30 supplements,’’ which means that 30 days 

after the submission, the firm can release the new production from the new site unless FDA objects. A recent example is a firm that needed a new site to increase supplies of a cancer drug and two other drugs in shortage. We accepted the site addi-
92 

tion as a CBE–30 supplement because the firm was recently inspected, had no quality concerns, and makes similar drugs for the U.S. market. 

For drugs in shortage or for those with potential for shortage, FDA works closely 

with the firms so that their applications and inspections can be expedited. 

Question 2. What percentage of manufacturing changes requires prior approval by 

the FDA, and how does that compare with the EU? 

Answer 2. FDA does not compare and/or tally the different types of manufacturing 

changes in this manner. However, while not an exact match, the requirements for 

filing manufacturing changes in the European Union (EU) are similar to the FDA. 

Not all changes require prior FDA approval (for example, the CBE–30 supplements 

discussed above) and for those that do, any shortage related applications—requiring 

prior approval or not—are expedited. 

Question 3. Please identify the specific drug shortages you have prevented and describe how you did it. How do you define a prevented shortage? 

Answer 3. FDA regularly intervenes in potential shortage situations to help prevent or minimize shortages. Since October 31, 2011, when the President issued his 

Executive order, FDA has worked closely with manufacturers to prevent 114 drug 

shortages. 

• Of the drugs involved, 86 were manufactured by one firm. The firm had lost 

the supplier that it used for material in the container for these products. FDA 

worked closely with the firm to quickly qualify and approve the new supplier and 

was able to prevent shortages of the affected drugs. • The other 28 potential shortages involved different causes and solutions: 

• Expedited Importation (two potential shortages): Impending shortages of two 

drugs were averted by expediting the importation of these approved drugs 

from outside the United States. Both of these approved drugs are manufactured overseas for the U.S. market. The U.S. inventory levels of these drugs 

were insufficient to meet demand. With respect to one of those drugs, there 

was an unanticipated increase in demand and the manufacturer needed 

FDA’s assistance to respond to that demand. In the second case, a manufacturing delay caused a reduction in supply. In both cases, FDA expedited the 

importation process so that the drugs could be imported quickly to avoid a 

shortage. • Quality Problems (14 potential shortages): During the same time period, FDA 

prevented 14 of these potential shortages by rapidly addressing quality problems. • One potential shortage involved a firm that had a slightly out-of-specification 

test result for their finished drug product, but which did not represent significant risk for patients. Therefore, FDA allowed the firm to ship the finished 

product in inventory, while they corrected the problem for future lots. • The second potential shortage resulted from a quality issue with the glass 

used for syringes for use with a particular drug. With guidance from the 

Agency, the firm was able to do additional testing to remove all of the defective syringes from the batch, before releasing the product to the market. 

• The third potential shortage involved a quality problem at the manufacturing 

site of a manufacturer that makes sterile water used to dilute injectable 

drugs that are in a powder formulation and that need to be reconstituted before use. FDA determined that the quality issues did not have an impact on 

the sterile water vials, so we permitted the firm to release the drug with the 

sterile water vials while it worked to correct the problems at the manufacturing facility. 

• The fourth potential shortage involved glass particles in vials of a medically 

necessary drug. Working with the Agency, the firm was able to show that 

pharmacists could successfully filter the drug to remove the glass if they were 

provided with adequate instructions, and that there would not be a significant 

risk to patients from the filtered drug. FDA, therefore, permitted the firm to 

release the drug with approved instructions to filter the drug before use. 

• The remaining issues involved general systems problems at manufacturing 

sites that could have had an impact on the safety or quality of the drugs 

made in the facilities. FDA worked closely with the firms, and they were able 

to take additional steps to ensure that there were no significant risks for patients due to the issues and that the drugs could be released to avoid a shortage while the firms corrected the problems. 

• Expedited Review of Supplements (nine potential shortages): These involved 

firms that needed new facilities, new suppliers, and/or changes to their product formulation approved to avoid shortages. For example, one firm shut 
93 

down its original manufacturing site and opened a new facility. As required 

by law, the firm submitted a ‘‘supplement’’ to its application to seek FDA approval to manufacture the drug product at the new facility. FDA expedited 

the inspection of the facility and approval of the supplement, completing review, inspection, and approval in 60 days—well in advance of the PDUFA 

goal of 6 months—to avoid a shortage of the product. 

• Increased Production (three potential shortages): With respect to the remaining three potential shortage situations, FDA worked with alternative manufacturers of drugs that were facing potential shortages to ramp up production 

to cover the anticipated shortfall. In these situations, FDA learned that the 

manufacturer in question was facing problems (two involved quality problems 

and one involved a product recall). As soon as FDA became aware of potential 

shortages of the products in question, we initiated an outreach program and 

worked with other manufacturers to avert the shortage. 

Question 4. How many more notifications do you expect with the change in the 

IFR, and how do you define an action that may precipitate a shortage? 

Answer 4. The Interim Final Rule (IFR) defined the term ‘‘discontinuance’’ in 

FDA’s regulations to include both temporary and permanent interruptions in the 

manufacturing of a drug product, if the interruption could lead to a disruption in 

the supply of a product. The IFR also clarified the definition of the term ‘‘sole manufacturer’’ to refer to an applicant that is the only entity currently manufacturing a 

drug product of a specific strength, dosage form, or route of administration for sale 

in the United States, whether the product is manufactured by the applicant or for 

the applicant under contract with one or more different entities. 

We anticipate an increase in notifications as a result of the IFR. It is difficult to 

predict how many additional notifications will occur with the change in the IFR; 

however, FDA is continuing to see an increased number of notifications in 2012 from 

manufacturers, some of which are a direct result of the IFR. The earlier FDA learns 

of a drug shortage, the more effective FDA can be in helping to minimize the impact 

on patients and health care professionals. For this reason, legislation requiring early 

notification of impending supply disruptions and discontinuation of drugs is a necessary tool in mitigating or preventing shortages. 

QUESTION OF SENATOR BURR

Question. How many of the drugs recognized to be in shortage by the FDA are 

drugs for which generic drug applications are currently pending review by FDA? 

How many of these generic drug applications for drugs currently experiencing a 

shortage, or that have experienced a shortage over the past 5 years, have been 

pending review past the 6-month statutory review timeframe? 

Answer. We are not aware of any such applications. FDA’s OGD routinely monitors the queue of generic drug applications and takes action when an application 

involves a product that may help prevent a shortage or resolve one. With respect 

to new applications, OGD regularly monitors all incoming applications to determine 

whether any are for drugs that are facing a shortage situation. When we identify 

an application relating to a drug in shortage, we designate the application for expedited review and proceed with the review on that basis. Notwithstanding expediting 

the review of applications for generic products that may help alleviate a drug shortage, all applications still must meet FDA’s standard for approval. 

There are reasons why a generic application associated with a shortage drug could 

and would remain ‘‘pending’’ after a successful review and inspection. In some cases, 

an application cannot be granted final approval because the brand in shortage holds 

a valid patent that the generic-application sponsor has chosen not to challenge. In 

that case, FDA cannot approve the generic application until the patent expires. Another issue that could affect the review time of a drug in shortage is that it is not 

always possible to know ahead of time that a product will be in short supply. As 

mentioned above, new applications relating to drugs in shortage are designated for 

expedited review, but it is possible that, prior to a particular drug going into shortage, an already existing application would be pending with FDA and appropriately 

proceeding through the queue. This may be why applications appear to be pending 

for some period of time for drugs on the shortage list, especially if the drug was 

recently added to the shortage list. 

QUESTIONS OF SENATOR HATCH

Question 1. How does the Office of Drug Shortage work with the Office of Compliance? Do they consult one another before taking action to relieve or mitigate short-
94 

ages? Do they consult one another before taking enforcement actions that could lead 

to shortages? 

Answer 1. Staff in DSP and CDER/OC communicate almost on a daily basis to 

discuss potential and actual shortages. The Office of Drug Security, Integrity, and 

Recalls (ODSIR), Recalls Coordinating Branch (RCB) within CDER/OC, is the liaison to DSP. CDER/OC reports weekly to DSP a summary of all pending CGMP regulatory cases. 

DSP is notified prior to a CGMP enforcement action, such as a Warning Letter, 

seizure, and injunction, to help evaluate and/or mitigate the impact such actions 

may have on medically necessary products. In addition, if severe violations are identified during an inspection, the investigators contact CDER/OC, who in turn, will 

notify DSP of the violations and have a market impact evaluation done, unless it 

is obvious that the products affected are not medically necessary. The potential for 

shortage is evaluated along with the impact the shortage would have on patients, 

as well as any risks involved with the drugs in question. Decisions about specific 

regulatory compliance actions take into account their potential impact on availability of drugs, the medical necessity of those drugs in clinical practice, and the 

level of risk involved with a firm’s manufacturing and CGMP deficiencies. In all 

cases, FDA works closely with the firm(s) to minimize any risks while working to 

restore and maintain safe supplies. 

Question 2. How many of the products in shortage were provided with a warning 

letter from the Office of Compliance prior to being in shortage? Of those products, 

how many warning letters were specifically regarding the safety of the product sold 

on the market? 

Answer 2. This information is not readily available, although we do know that 43 

percent of shortages are related to problems at the manufacturing facility. We are 

conducting a comprehensive, retrospective review to see if manufacturers of products in shortage received a Warning Letter prior to the shortage. This is resourceand time-intensive. We will share the outcome of our review once it is available. 

Question 3. Is it accurate to say that FDA inspects Contract Manufacturing Organizations when the organization enters into a new contract with an innovator to 

manufacture a particular product? If so, would it not be better to provide a general 

quality system review when requested by the CMO as opposed to waiting for the 

organization to enter into a contract? It is my understanding that manufacturers 

prefer contracting with CMOs that are already FDA-approved, many of which are 

abroad. If the CMO is pre-approved prior to the contract, could that not help to alleviate shortages by increasing U.S. manufacturing capacity? 

Answer 3. FDA inspections of manufacturing sites are prompted by the site’s registration with FDA, which is required when a site begins to manufacture and distribute drugs and when a site is identified in a new drug application. For drug manufacturing sites that are listed with FDA, we perform routine inspections and, 

where appropriate, we will use information from a routine inspection to waive a preapproval inspection before additional drugs are made at the facility. In other words, 

we already consider a listed site’s compliance with CGMPs—and each CGMP inspection must cover the site’s quality system—in deciding whether to approve a manufacturing site for additional application drug products. If we were to inspect before 

the time a contract is signed, this could result in unnecessary site inspections, for 

example, if a site is not, in fact, named in an application. 

Question 4. Do you believe the proposal offered by the Generic Pharmaceutical Association will have a significant impact on drug shortages? Do you believe the FDA 

is already filling the role of the third party entity they suggest establishing for purposes of coordination? If not, how is it different? 

Answer 4. FDA has met with Generic Pharmaceutical Association and will continue to work with them on shortages. We recently heard some initial information 

from them about their proposal, the Accelerated Recovery Initiative. There is not yet 

enough information provided to FDA to make a determination about the impact this 

proposal could have on drug shortages. 

[Whereupon, at 12:44 p.m., the hearing was adjourned.] 

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