When Akorn Pharmaceuticals shut its doors in February, hospitals across the country felt it.
The Lake Forest, Illinois-based drugmaker was responsible for producing 75 generic drugs, all of which were pulled from the market when the company closed down. In some cases, the company was the sole supplier of particular products.
The closure comes amid — and contributed to — an ongoing drug shortage crisis in the U.S. Akorn’s bankruptcy and subsequent shuttering are part of a bigger disaster caused by fewer manufacturers’ in the U.S. making cheaper generic drugs, scarce profits for the remaining companies and an overly complicated global supply chain that could leave patients scrambling for lifesaving medications for months or possibly years to come.
New drug shortages increased by nearly 30% from 2021 to 2022, affecting 295 products at the end of last year, according to a March report from the Senate Committee on Homeland Security and Governmental Affairs. The drug shortages are affecting cancer patients who are in desperate need of chemotherapy drugs and people in intensive care units or emergency rooms who need certain generic intravenous medications, which are in tight supply.
The shortages are getting worse: As of June, there were more than 300 active drug shortages, the most in nearly a decade, according to the American Society of Health-System Pharmacists, a professional organization that tracks drug shortages.
Why is this happening now?
Drug shortages are not new. There have been supply crunches for heart medications, cancer treatments and ADHD medications in the U.S. and globally in recent years. The generic drug supply is especially vulnerable. Companies like Akorn face intense competition and declining profits and have been forced to lay off workers and cut costs to stay in business.
With Akorn’s closure, the U.S. lost a “chunk” of its manufacturing capacity, all while other generic drugmakers struggle to stay in business, said Valerie Jensen, the associate director of the Food and Drug Administration’s drug shortage program.
“When we see a firm like Akorn close down, that’s extremely concerning to us because then we lose that capacity,” Jensen said. “And then we have to work really closely with other companies to ramp up to cover that shortfall. So it’s definitely concerning, and we continue to monitor very closely.”
Douglas Boothe, the former CEO of Akorn, did not respond to a request for comment. Emails to Akorn’s media relations contacts went unanswered.
Americans rely heavily on generic drugs: They account for about 90% of all prescriptions filled, according to the Association for Accessible Medicines, a trade group that represents generic drugmakers.
At the same time, generic drugs — which are sold for very low prices — represent only about 20% of drug spending in the U.S. Even with high demand for the products, the low cost of the drugs means generic drugmakers don’t make much money, according to David Gaugh, the interim president and CEO of the AAM.
Over the last decade, the number of generic drugs made in the U.S. has dwindled. A working paper from the National Bureau of Economic Research, a nonprofit, nonpartisan research group based in Cambridge, Massachusetts, found that from 2013 to 2019, the number of U.S. facilities registered to make active pharmaceutical ingredients fell about 10%, to 118. The only year that number did not fall was 2014, according to the report.
Latest on drug shortages
When Akorn shut down after it filed for bankruptcy, it was one of two U.S. suppliers of liquid albuterol, an essential medication hospitals use to treat asthma and RSV in children.
It was one of the most in-demand products for the company, said Mohammed Kabir, who worked as Akorn’s director of formulation development before the company closed.
“It was a huge surprise,” Kabir said of Akorn’s shuttering.
The company, which was founded in 1971 as an eye care products manufacturer, expanded to make a range of drugs such as antibiotics, pain and allergy medicines, and veterinary drugs. Its generic drugs included adenosine, which is a drug for irregular heartbeats, and lorazepam, which is used for anxiety as well as nausea and vomiting in some cancer patients. It was the sole supplier of physostigmine, an antidote for overdoses from certain medications, according to a report from the End Drug Shortages Alliance, a group dedicated to preventing drug shortages.
In the wake of Akorn’s closure, all its drugs are either in shortage or running into supply problems as other generic manufacturers struggle to fill the gap, according to the American Society of Health-System Pharmacists.
Even worse, when Akorn shuttered, it could no longer monitor the quality and safety of many of the drugs it had already distributed nationwide to retailers, medical facilities and consumers online. In early May, the FDA announced that Akorn was recalling drugs that had been distributed.
At the Mayo Clinic, pharmacists scrambled to switch suppliers or figure out a way to get medications that only Akorn produced. The clinic also had to get rid of any remaining Akorn products and notify doctors and patients about the recall.
“It’s definitely a challenging situation,” said Eric Tichy, division chair of pharmacy supply solutions for the Mayo Clinic in Rochester, Minnesota, and board chair of the End Drug Shortages Alliance. “The experience led to additional work for our team and anxiety for patients.”
Generic drug shortages could get worse
Once a pharmaceutical patent expires, generics are allowed on the market, often at a lower price than the brand-name drug.
“The fundamental problem is the economics of the system,” FDA Commissioner Robert Califf said at the Aspen Ideas Festival in late June. Unlike brand-name drug companies, he said, generic drugmakers are not protected by patents that allow them to exclusively sell medications for a set period of time. In order for generic drug manufacturing to grow in the U.S., companies need to be paid enough to manufacture the drugs and stay in business.
The problems facing the industry now are likely to get worse as more U.S. companies go under.
Lannett Co., a generic drug manufacturer in Pennsylvania, announced in May that it was filing for Chapter 11 bankruptcy, although it plans to continue operating as it restructures its business.
Teva Pharmaceuticals, a major generic drugmaker based in Israel, said in a statement the same month that it was cutting back on its generic manufacturing. Early last year, Aurobindo Pharma, based in India, announced it was closing its U.S. generic manufacturing facility in New Jersey.
“It has become a race to the bottom,” Gaugh said.
The generic drug industry’s business model has become unsustainable for many manufacturers, said Michael Ganio, senior director of pharmacy practice and quality at the American Society of Health-System Pharmacists.
“If you talk to someone in the generic drug industry, they’ll tell you that about a third make money, a third break even and a third lose money,” he said.
Risks of relying on foreign drugmakers
The U.S. is already highly dependent on foreign drugmakers. In 2021, 78% of the suppliers of active pharmaceutical ingredients were in China, India and the European Union, according to the FDA. With Akorn’s closure, the U.S. will be even more dependent on overseas manufacturing.
Foreign suppliers don’t always meet the rigorous FDA standards for generic drugs. What’s more, FDA visits to foreign facilities are often notified in advance and the investigators may rely on the facility to provide translation services — raising concerns about whether the agency is getting all the information it needs to accurately assess the quality of the products.
“Overseas production in China and India has edged out all but a few manufacturing plants in North America,” said David Gortler, a former science policy adviser at the FDA and an FDA oversight expert. “Unfortunately, lower prices are usually accompanied by poor quality.”
In December, Intas Pharmaceuticals, a generic drug manufacturer based in India, suspended production after an FDA inspection last year cited numerous quality concerns. The suspension caused a widespread shortage of cisplatin, a chemotherapy drug used for a variety of cancers, including testicular, lung, bladder, cervical and ovarian.
Global Pharma, also based in India, recalled its EzriCare Artificial Tears eye drops this year after the products were linked to highly drug-resistant bacterial infections that resulted in four deaths. An FDA inspection found that the company did not follow proper protocol to prevent contamination of its products.
Intas Pharmaceuticals and Global Pharma did not respond to requests for comment.
The move toward more drug manufacturing abroad is “a big issue of national security,” especially given the current state of international strife, Califf said.
What can be done?
There are no quick fixes. Drug companies are not required to disclose exactly which suppliers are making which product as well as the location, said Erin Fox, a pharmacist and professor at the University of Utah College of Pharmacy. That means it’s very difficult for the FDA to know which products are made overseas.
“The problem is we don’t know what’s coming from where and how much,” Ganio said. “It’s not easy to access.”
In a report published in June, the Association for Accessible Medicines’ policy team described several steps the U.S. government could take to help keep domestic generic drug manufacturers afloat.
They included creating incentives for hospitals to purchase supplies of generics at fixed prices for multiple years, providing generic drugmakers with a continuous source of revenue. The government could also provide grants to generic manufacturers that would allow them to update their manufacturing facilities as well as build new facilities that could provide additional capacity.
The steps also included that Medicare drug plans cover and encourage the use of new generics.
Because generic drug manufacturing is a very complex, highly regulated industry, it’s not easy for new manufacturers to immediately jump in, Tichy said.
That means patients who need the medications will go without them.
“The marketplace is already tight on supplies,” Tichy said. “How are we going to communicate that to patients?
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