Why Are There Prescription Drug Shortages? (Guest: John Goodman)

Published April 19, 2023
Have you ever visited a pharmacy only to discover that your prescription medication was out of stock? This issue is not limited to drug stores; it also occurs in hospitals and medical clinics, and the cause is rarely due to a lack of raw materials. John Goodman, the president of the Goodman Center for Public Policy Research and co-publisher of Health Care News, testified about prescription drug shortages before the U.S. Senate Committee on Homeland Security. He argued that the primary source of the problem lies in flawed public policy that constrains the pharmaceutical market.
Goodman revealed that between 186 and 308 drugs experience shortages, including some life-saving medications. As a result, hospitals and doctors are often forced to delay treatment or use alternative drugs, which can lead to even more significant issues down the line. One contributing factor is the FDA’s stringent regulations, which make it exceedingly difficult for drug manufacturers to swiftly respond to fluctuations in demand. Consequently, competitors struggle to fill the gap.
Other factors exacerbating the situation include a rule that mandates pharmacies to utilize the least expensive alternative for a drug, often a generic version. This regulation suggests that the only critical aspect of a drug is its price. Moreover, rules governing Medicare Part B can contribute to shortages, as well as a lesser-known program called 340B. This program enables large hospital corporations to acquire drugs at extremely low prices and then mark them up for third-party payers.
Goodman’s testimony can be read here.