Generic Cancer Drug Shortage

Today’s Managing Health Care Costs Indicator is 14

Ezekiel Emanuel has a column in this weekend’s NY Times  pointing out that there are currently national shortages of 14 of 34 generic cancer drugs currently on the market.  As a result, oncologists are rationing care, and some with leukemia are unable to receive the standard care.  Here’s a link to a Boston-affiliate public radio interview on the same topic.

The underlying problem here is that the 2003 Medicare Part D act, which limited oncologist payment for chemotherapeutic drugs, also put in place a cap of price increases for these generic drugs.   This cap, while well-meaning, has turned out to be too low to support new generic company capital investments in plants to manufacture generic chemotherapy drugs .

It’s possible that we’ll need some type of price control for branded pharmaceuticals.  Sometimes a branded oncology drug costs as much as $90,000 – and there is no competition for unique medications still under patent.   However, price controls can cause unexpected market distortions – like the problem we’re having now with oncology medications.  European governments extensively regulate drug prices, but their generic cancer drugs prices are higher than ours, and they are not suffering from supply shortages.

I’ve written in the past about apparent drug discounts which can actually raise overall costs.  In many cases a pharmaceutical company offers a discount to patients, which undermines a higher differential cost patient share and eliminates price sensitivity.  This raises the average price paid by all purchasers.

The shortage of generic cancer drugs is another example where the lowest unit price doesn’t lead to the best value in health care purchasing.