Why Cancer Drugs Are Being Rationed

The government squeeze on generic profits is leading to shortages

WSJ editorial. Excerpts:

"The American Society of Health-System Pharmacists lists 301 drugs in short supply, up from 202 five years ago. These include many local anesthetics, basic hospital drugs, chemotherapy drugs and liquid albuterol for lung ailments.

The American Cancer Society warned this month that “first-line treatments for a number of cancers, including triple-negative breast cancer, ovarian cancer and leukemia often experienced by pediatric cancer patients,” are facing shortages that “could lead to delays in treatment that could result in worse outcomes.” Healthcare providers say they’re having to limit access to some drugs to the sickest patients. They can substitute therapeutic alternatives when possible, but this increases risk of medication errors and inferior results. What’s going on?"

"most drugs in short supply are older generics that are off-patent and complicated to make. Manufacturers have stopped producing them because profit margins are too thin, resulting in one or two suppliers."

"Fewer branded drugs are in short supply because their manufacturers build more slack and resilience into supply chains. Higher profits give them more capital and a financial incentive to do so. And therein lies the underlying problem: Generic profits have shriveled owing to government efforts to reduce drug spending."

"low Medicare and Medicaid reimbursement rates have increased pressure on providers to lower costs."

"Mandatory Medicaid rebates have also squeezed generic drug margins. Medicaid is the top payer for many generic drugs. But low reimbursements by government health systems are a global problem, and manufacturers with plants in Europe cut production amid last year’s energy price spike."

"Politicians criticize generic companies for shifting production to India and China to reduce costs, but the alternative for many would be to go out of business, as Illinois-based Akorn Pharmaceuticals did this winter."

"The solution is for government to pay more for drugs, which politicians oppose because it will increase healthcare spending."

"The Inflation Reduction Act requires manufacturers of single-source generics and branded drugs to pay Medicare rebates if prices rise faster than inflation. This limits manufacturers’ ability to pass on rising costs and invest in supply resilience and quality control. Medicare “negotiations”—i.e., price controls—will also shrink brand drug margins."