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Who’s to Blame for Drug Shortages?

All the best effort to practice science-based medicine are for naught when the optimal treatment is unavailable. And that’s increasingly the case – even for life-threatening illnesses. Shortages of prescription drugs, including cancer drugs, seem more frequent and more significant than at any time in the past. Just recently manufacturing deficiencies at a large U.S.-based contract drug manufacturer meant that over a dozen drugs stopped being produced. This lead to extensive media coverage, speculating on the causes and implications of what seems like a growing problem. So who’s to blame?

First, some perspective. Drug shortages are not a new problem. I’m a pharmacist who has worked in almost every healthcare setting – and dealing with shortages is a time-consuming and frustrating part of the the profession. However, the perception, even among health professionals, is that this situation is worsening. Statistics back this up. U.S. sources accurately track the prevalence of drug shortages and it hit a record high in the first half of 2011, with over 180 drugs reported to be in short supply. Before you blame the dysfunctional American health care system – it’s not just there. The same issues are occurring in Canada, and the United Kingdom, an some are worldwide. Managing shortages is a problem that affects all aspects of a patient’s treatment. Consider the impact of a cancer drug that disappears suddenly from the market, which looks to the be the case with the chemotherapy drug Doxil:

  • Pharmacists struggle to ensure inventory levels are in place to meet treatment demands. Managing supplies can be a daily crisis.
  • Cancer centres and hospitals struggle to coordinate treatment plans, unsure if necessary drugs will be available. In some cases, substitutes may be necessary. So called “grey market” vendors may take advantage of the shortage, buying up dwindling stock and then reselling it, at tremendously inflated prices [PDF].
  • Insurance plans need to confirm payment of alternative treatments and elevated prices.
  • Physicians are concerned about the impact on treatment regimens and the consequences of substitutions and delays on treatment plans.
  • Cancer patients, already dealing with a cancer diagnosis, may be concerned about access to their treatments, and the possible health consequences of delays and changes. They’re at a greater risk of medication errors due to switches in drugs and doses.

The shortage is so bad with Doxil that new patients may not start therapy – the dwindling supplies are restricted only to patients already on treatment.  While not all shortages are this bad, sterile injectable drugs seem to have the biggest supply problems problem. And when generic versions don’t exist, there’s no exact substitute. So where are these shortages coming from?

Causes

Drugs can be in short supply for two main reasons. Demand can grow and outpace supply, or the supply can be reduced, and there’s an inability to meed demand. All signs point to current shortages being a consequence of supply problems.

There is no single cause to supply interruptions. One of the biggest factors is changes in the generic drug industry. (Generic drug manufacturer can produce a product after it losses patent protection). Consolidation in the industry means there are fewer companies that will produce any product. And the manufacturers may outsource their production to contract organizations, due to the technical requirements involved. (Take a look at this Health Canada advisory which notes that one plant manufactures drugs for several different companies) .

What causes manufacturing issues? Problems emerge throughout the supply chain. In many cases, it’s regulatory agencies like the Food and Drug Association that identify quality or safety issues, interrupting production. With manufacturing increasingly becoming a global endeavor, the FDA now sends inspectors to plants in China and India where all or part of the supply may originate. It may be difficult to obtain or process raw materials that meet FDA quality standards. When problems emerge, manufacturers may decide that supporting production for low-profit or low-volume products doesn’t make economic sense. Combined with industry consolidation, the result is a dwindling number of companies willing to produce a product – and no excess capacity when there are interruptions with one supplier. A survey conducted [PDF] by the American Society of Health-System Pharmacists identified that product quality issues were the most common reason for interruptions, followed by discontinuations, capacity issues and delays, and raw material issues.

Some have attributed shortages to being a consequence of generic drug reimbursement policies. That’s what Ezekiel J. Emanuel argued in a recent New York Times op-ed. He argues that (U.S.) Medicare pricing policies have made selling generic drugs unprofitable, driving companies from the market.  But given shortages are are nothing new, sometimes involuntary, and exist worldwide, there’s no persuasive evidence that directly links reimbursement rates to supply issues. Tendering and bulk purchasing of pharmaceuticals, another common approach to purchasing, have the potential to impact supply, if a manufacturer given market exclusivity is suddenly unable to meet demands. But again, there’s no direct evidence that’s been the case, either in Canada or the USA.

A drug shortages summit in 2010 [like it already does for other drugs.

But these approaches don’t affect underlying challenge: No-one “owns” the supply issue.  And there is no single cause of shortages. That’s the challenge: Building accountability for drug supply throughout this complex pathway. There are other complicated supply chains in the world – perhaps there’s something that can leveraged from other industries and transplanted into healthcare. Because we all need to stay focused on who is at the receiving end of the supply chain: The patient, wondering if they’re going to get their medicine.

Posted in: Pharmaceuticals, Politics and Regulation

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36 thoughts on “Who’s to Blame for Drug Shortages?

  1. David Gorski says:

    This has actually been a problem in breast surgery. There have been periodic shortages of Lymphazurin Blue, which is the dye that we inject into the breast in order to do sentinel lymph node mapping. There are alternatives (methylene blue, for instance), but they tend not to work as well. We’ve also had periodic shortages of the 99Technetium, which is also used for sentinel lymph node mapping. On a couple of occasions, we haven’t been able to schedule surgeries, delaying patient treatment. Fortunately the delays weren’t too long, but they sure do upset patients—as well they should.

  2. Scott says:

    It seems to me that the key question is distinguishing when manufacturers can’t produce any more vs. they don’t want to produce any more. The latter would be associated with prices which don’t provide a sufficient profit margin, and would need to be addressed by higher prices (not something consumers will be happy about). The former has far more diverse causes and consequently far more diverse solutions.

    Essentially, from an economic standpoint shortages get addressed via increasing prices when demand exceeds supply, which incentivize increased supply to match demand. Failure for this process to take place can happen either because the price signal cannot be sent (e.g. due to price controls), or because it is ineffective due to inability to increase supply even if it would be highly profitable.

  3. windriven says:

    “there’s no persuasive evidence that directly links reimbursement rates to supply issues”

    Econ 101. If reimbursement levels were, say, $1,000,000 per pill that costs, say $2.00 to make, would there be an adequate supply? How about if the reimbursement level is $3.00 for a pill that costs $2.00 to make. Beyond the costs of manufacturing there are significant liabilities that attend to manufacturing anything, much less an FDA regulated drug. Drug companies aren’t charities; they have a responsibility to their share holders to return profits.

    All companies have finite resources of people and cash. Managers invest those assets where they will return the most profit. Spooling up production on a marginal product line is not going to strike most managers as the first place to invest money and personnel.

    1. Scott Gavura says:

      @windriven

      In the case of pharmaceuticals there are many elements of market failure, driven by information asymmetry and a complex set of incentives that don’t translate into smooth demand and supply curves.

      Consider that the both the person initiating the expense (the prescriber) and the recipient (the patient) may be unaware or indifferent to the cost of the item. The actual purchaser (in most cases, an insurer, but it could be the patient) may have few tools to shape demand, and may only be engaged in a transaction after the treatment decision has been made.

      The availability of the product, or any substitute is controlled by a third party (the regulator) who does not factor price or overall market supply into the decision-making process. Substitutes, depending on the drug, may be readily available (generics), imperfect (substitutes) or may not exist. The person or group guiding final product selection (the pharmacist or HMO, etc.) also may not be compensated in a way that sends clear market signals. Add in patents, formularies, bundled/group purchasing and other factors that may vary by region or country, and you have a complicated supply chain where there may be a disconnect between demand, price, and supply.

  4. cervantes says:

    It’s important to note that pills don’t cost $2.00 to make. Generally they cost pennies to manufacture. The cost of pharmaceuticals is all front loaded in development. The marginal cost of making one pill is trivial.

  5. windriven “Drug companies aren’t charities; they have a responsibility to their share holders to return profits.”

    Really? I could barely tell, with the average pharmaceutical execs pay being over 4 million, it’s hard to tell how they are scrapping by…

    http://aflcio.com/corporatewatch/paywatch/ceou/industry_2011.cfm

  6. Rogue Medic says:

    This has had the occasional positive effect on EMS.

    We have a lot of treatments that are based on medical mythology. When there are interruptions in the supply of these placebos, some people begin to realize that the standard of mythology was not missed.

    Some examples are furosemide (Lasix) for acute exacerbations of heart failure. Nitrates, CPAP (Continuous Positive Airway Pressure), and ACE inhibitors all improve outcomes, such as decreasing the rate of intubation.

    50% dextrose for decreased level of consciousness due to hypoglycemia. 10% dextrose works just as quickly and does not present the same problem of giving a very hyperosmolar drug through a peripheral IV.

    Lidocaine for cardiac arrest. There is no evidence that there is any benefit, except to the ego of the person giving the drug.

    The concern about the dosing of epinephrine in cardiac arrest with the shortage of 1:1,000 epinephrine, when there is no evidence that epinephrine improves survival to discharge or that one concentration is a better treatment than another.

    The results may provide evidence that might not be obtainable otherwise, since depriving patients of a “standard of care” is often rejected by IRBs, at least in the US. We have too many treatments that become “standard of care” without any evidence of efficacy and/or safety.

    The result of the various drug shortages is not all bad, but it would be much better if we could learn these lessons in a better way – perhaps by the use of science-based medicine and a more skeptical approach to mythology-based “standards of care.”

    .

  7. jpmd says:

    Not only do we deal with shortages, but with huge price increases when a perfect storm of mergers limit the number of drug producers combined with the difficulty in getting approval for a generic. A tube of Zovirax ointment was recently quoted at $400 when the generic capsules of the same drug costs around a $0.25. Evidently, no generic manufacturer for the ointment exists.

  8. windriven says:

    @cervantes

    “It’s important to note that pills don’t cost $2.00 to make.”

    I manufacture devices, not drugs, so I don’t claim special knowledge here. I would like to know the source of your information on the cost of manufacturing drugs.

    I have been given to understand that some drugs are wildly expensive just from the standpoint of raw materials. Beyond that there are capital equipment costs to be considered. A form-fill-seal machine, for instance, used for packaging can easily cost $500k and has a finite throughput. When jacking up production includes adding another piece of capital equipment there has to be more than an incremental increase in volume to justify the expense.

  9. windriven says:

    @michele

    You’ll wait a long time to hear me defend executive salaries paid throughout US industry. At my company we have a 15:1 cap. The highest paid individual cannot be paid more than fifteen times the lowest paid. There is a growing problem with wealth accumulation at the top in this country. It leads to an erosion of the middle class and a growing permanent underclass of poor.

  10. windriven says:

    @jpmd

    Amazon offers 5g tubes of 5% acyclovir ointment for $10.99. Unfortunately the labeling and, one supposes, the IFU are all in Russian. :-)

    http://www.amazon.com/Russia-Acyclovir-ointment-5-5g/dp/B004JPE918/ref=pd_sim_hpc_1

    Actually, bulk acyclovir is pretty easy to come by. Packaging it as an ointment sounds like a fine business opportunity for someone willing to do the regulatory gymnastics.

  11. windriven says:

    @Scott

    I certainly agree and wouldn’t argue this to be a single-cause problem. I am simply arguing that price elasticity of supply affects drugs as much as it affects apples or Apples.

    To my mind saying that, “there’s no persuasive evidence that directly links reimbursement rates to supply issues,” is inaccurate. The linkage between the two is axiomatic.

  12. Woody says:

    An example from the opposite end of the cost spectrum relative to pills would be enzyme replacement therapy. The condition where this comes up that I am somewhat familiar with is Pompe disease which is a muscle disorder in which faulty production of an enzyme leads to progressive muscle dysfunction. The disorder can present throughout the lifespan, but the course was almost invariably fatal for infants in the first year of life prior to the advent of enzyme replacement therapy.

    http://www.ncbi.nlm.nih.gov/pubmed/21518733

    The company that produces the bioengineered enzyme replacement therapy quotes the annual cost of treating someone with Pompe disease at approximately $300,000.

    http://www.genzyme.com/commitment/patients/costof_treatment.asp

    My understanding (as an adult neurologist, I don’t see these infantile cases) is that there have been situations in which families have started these therapies for their affected child, only to be told after a year or so of therapy that it will no longer be covered by their insurance. I think it is safe to say that most families cannot afford such therapy out of pocket. If the company has to charge such prices to recoup their investment, and the patient population is small (rare disease = limited market), who should pay for the treatment?

  13. windriven says:

    @Woody

    “If the company has to charge such prices to recoup their investment, and the patient population is small (rare disease = limited market), who should pay for the treatment?”

    What a great comment! I would argue that the insurance company should pay; insurance is for the unexpected. That makes far more sense to me than insurance companies paying for routine office visits, etc. People need to have ‘skin in the game’ to avoid misusing a scarce resource (medical care). Insurance should cover the unexpected and the financially unmanageable.

    This leads inevitably to the question: once the limits of the insurance policy are reached, who pays then?

  14. Windriven

    “I would argue that the insurance company should pay; insurance is for the unexpected. That makes far more sense to me than insurance companies paying for routine office visits, etc. People need to have ‘skin in the game’ to avoid misusing a scarce resource (medical care). ”

    I like that in concept, but I doubt it would work in execution. One problem I see with that model is it tends to encourage people to skip wellness and preventative visits to the doctor, since that’s out of pocket, and to wait until their problems fall into a category that qualifies for an insurance payout. You’d at least have to require some minimum regular checkup visits out of pocket, just like automobile extended warranties/ service contracts require you to comply with various maintenance schedules for your vehicle to keep the contract valid. But people would still tend to skip any visits to the doctor not covered by the catastrophic health insurance.

    Somehow you have to find a way to balance the various aspects of paying for health care: shared actuarial risk (insurance), shared purchasing power (group buying plan to provide greater bargaining power to negotiate prices), and investment/deferred annuity contracts (invest a little money each month now so you can afford the very expensive anticipated health care you’ll likely need in old age/ near the end of life).

    Of course none of these really address the actual costs of health care. Group purchasing power can help control prices by forcing acceptance of lower profit margins, but that power has it’s limits. Figuring out ways to bring down actual costs other than just forcing lower profit margins would be a big plus.

    We don’t want to interfere in people’s freedom to live how they want, but it’s hard to get people to appreciate that lifestyle choices today have real world costs tomorrow.

    “…as a species we’re just really bad at understanding costs that come later on. Instead, we assign a disproportionate amount of importance to what’s immediate and tangible.”

    -Barbara Kiviat of Time.com writing about credit cards but applicable to far more.

  15. Rick says:

    If you want to hear about pricine at the gout drug Colcrys (colchicine). In July 2009, Philadelphia-based URL Pharma Inc, was granted 3 years of marketing exclusivity for colchicine for acute gout flares, and generic sales were forbidden by the FDA. This approval was made under the Waxman-Hatch Act, based in part on pharmacokinetic studies and randomized controlled trials that studied 185 patients with acute gout. Previously, colchicine has been widely used off label despite lack of formal FDA approval; use of colchicine or its precursors for gout dates back to at least 550 CE.

    At the time of the URL Pharma approval, 21 companies were making oral colchicine, and the cost was as low as $0.04 per tablet. In September 2010, the FDA ordered a halt to marketing of unapproved single-ingredient oral colchicines. After obtaining marketing exclusivity, URL Pharma raised the price to $5 per tablet.

    http://www.medscape.com/viewarticle/744408

  16. daedalus2u says:

    Karl, one of the biggest “costs” in health care delivery is insurance company profits.

    Another big “cost” is insurance company administrative costs trying to dump people they are insuring with high medical needs off of their system and onto another. That administrative cost is only about moving costs onto someone else.

    Health care by private insurance companies is inherently unstable. An insurance company that pays for $300,000 per year drugs for a lifetime will have higher costs than a company that doesn’t. The company with lower costs can charge lower premiums and still make profit.

    A “system” of private health insurance can’t deal with $300,000 per year costs for a lifetime except by rationing and letting such patients die or the insurance company stuck with those costs will go out of business so the patient loses coverage and dies anyway.

  17. daedalus2u,

    Of course, private health insurance companies are in the business of maximizing the ratio of money taken in vs money paid out. That’s why a pure private model without government intervention will leave people out in the cold. Regardless of who pays directly, it ultimately comes out of individual pockets and all health care is rationed, it’s just a matter of how to spread the cost and what basis is used to ration.

    I personally question whether the private model (even with government intervention) can ultimately succeed. Private insurance companies are concerned with pleasing their share holders by maximizing returns on their investments and not with pleasing everyone who ever wants to be their customer.

    The current “Obama Care” plan tries to share actuarial risk and spread costs by providing an individual mandate (which was a Republican proposal in the Clinton era) and forcing people with few heath care costs into the buyers pool to spread the risk.

    It’s questionable that the penalties are sufficient to force everyone into the buyers pool, but even if it works, I doubt that will be enough when the baby boomers start to enter the last stage of their life (especially the last few years) when health care expenditures tend to sky rocket.

    When that happens, no matter what system is in place, it’s likely going to be very expensive unless we find viable and acceptable ways to reduce the amount of money spent per individual. We can cut or eliminate profit margins, eliminate middle men, reduce the actual costs of various health care services and procedures, reduce utilization of services and procedures, etc, but spending per individual will have to be controlled.

    Scott, I’m sorry to have sidetracked the discussion so much.

  18. windriven says:

    @Karl

    You are, of course, absolutely right. The health care program that I provide pays a copay for office visits and drugs. This keeps a little skin in the game while taking the financial sting out of routine care. It also encourages the use of generics as the copay for those is half the copay for ‘as written’ drugs.

    @daedalus

    “A “system” of private health insurance can’t deal with $300,000 per year costs for a lifetime except by rationing”

    Rationing is a fact of life wherever a finite resource is involved. Whether the operator is private or public is not the issue so far as rationing is concerned. If you have a real life insurance model to offer that magically avoids this reality I’d love to know about it.

  19. ConspicuousCarl says:

    Scott Gavura said:
    There is no single organization responsible for ensuring this complicated process ensures that once started, supply isn’t interrupted.

    If there is no single cause, and possibly many unrelated causes, I don’t see why one should imply that there should be a single entity in charge of preventing a symptom. A single entity may not be competent in all necessary areas, and it might even duplicate functions which could already be performed by other entities.

    Different causes should be addressed independently. I don’t want another FCC, which is OK for ensuring efficient and non-interfering usage of limited spectrum, but is either evil or incompetent in other areas which have been dumped on the same agency just because they have something to do with radios.

    Or we could go your way, and just have a single Commission for the Prevention of All Bad Things Regardless of Cause.

  20. ConspicuousCarl says:

    windriven on 01 Sep 2011 at 1:03 pm
    To my mind saying that, “there’s no persuasive evidence that directly links reimbursement rates to supply issues,” is inaccurate. The linkage between the two is axiomatic.

    You are talking about a general rule in a general situation. He is talking about the lack of evidence that this is actually the cause in this particular case. Gravity removes apples from trees, but so do fruit-pickers. Either proposition could be supported by your undeniable 101-level axiom argument, so we would need evidence to decide if a particular apple really was removed by gravity.

  21. ConspicuousCarl says:

    Karl Withakay on 01 Sep 2011 at 4:54 pm

    Private insurance companies are concerned with pleasing their share holders by maximizing returns on their investments

    You and daedalus2u are using your mental stereotype as if it were a rule.

    http://en.wikipedia.org/wiki/Mutual_insurance

  22. Let me correct and clarify my statement:

    Private, for profit insurance companies are concerned with pleasing their share holders by maximizing returns on their investments.

    Any successful insurance system must ensure payouts do not exceed pay ins.

  23. windriven says:

    @ConspicuousCarl

    Dude. Seriously?

    In fact I am talking about a general rule in a specific situation. I am talking about a fundamental economic principle as applied to a specific situation.

    I’m not going to go through an explanation that gravity doesn’t “remove the apple” from the tree. It does however move the apple from its initial position to whatever happens to be between the apple’s position and earth’s center of gravity*. Suffice it to stick with your analogy and replace the apple picker’s hand with with Adam Smith’s invisible hand of the marketplace. ;-)

    * let’s agree not to get off into the weeds with an ad nauseum back and forth about confounding matters of wind, angular velocity of the earth and so forth.

  24. ConspicuousCarl says:

    windriven on 01 Sep 2011 at 8:27 pm

    @ConspicuousCarl

    Dude. Seriously?

    In fact I am talking about a general rule in a specific situation. I am talking about a fundamental economic principle as applied to a specific situation.

    Economic principles apply to marginal changes, with all other details being known and equal. Maybe you know absolutely everything about the current state of all current cases of inadequate supply. If not, then you don’t know what caused the specific current quantity supplied. One of the things which some people in Economics 101 had trouble getting through their heads the first time was that “quantity supplied” (a specific exact quantity) is not the same as “supply” (which is represented by the entire curve). It is easy to list the rules which make the current quantity supplied move along that curve, but you do not know what the supply curve is going to look like, or why it does.

  25. Scott says:

    To my mind saying that, “there’s no persuasive evidence that directly links reimbursement rates to supply issues,” is inaccurate. The linkage between the two is axiomatic.

    That there is a linkage, yes. That said linkage accounts for any particular supply issue, absolutely not.

  26. windriven says:

    @Conspicuous Carl

    The issue we are discussing is inadequate supply of certain pharmaceuticals. While there may be some fraction of these that depend on unobtainium catalysts for their synthesis, many do not. The case of acyclovir ointment mentioned above springs to mind.

    Neither I nor anyone else need “know absolutely everything about the current state of all current cases of inadequate supply” to understand that there are reimbursement levels at which many current cases of inadequate supply will ease or disappear. Further, neither I nor anyone else need know “what the supply curve is going to look like.” It is quite enough as a general principle to know that the curve exists and the general form that it will take.

    Share with us if you will what exactly your point is.

  27. Rick says:

    Let me say this about insurance companies. I learned a lot working eight years for one. First there are many types of companies with many different products. People need to get over the fact that health insurance companies are in the business to make money. Guess, what? So is everyone else in healthcare (expect for the government the largest payer of healthcare) form nurses and doctors, to hospitals and drug companies, and the company that pays for all these services.

    I worked for a very small staff model HMO, which means that we employed our own doctors and nurses to run a handful of family practice offices. There are massive staff model HMO’s like Kaiser on the west cost that owns hospitals, as specialists, etc. This is some what unique to healthcare were our insurance members our also our patients. It is believed this type of system keeps costs down.

    Now the issue of dumping patients. This is very difficult and usually not worth the hassle (i.e. legal process). We did not dump sick patient, or at least sick compliant patients. The one patient I remember when to court. We wanted him out, because he was non-compliant with this pain management plan. He exhibited drug seeking behavior by going to a number of different providers to get pain medications. He also threatened a number of staff members. There is a very big debate in the medical community about discharging a patient from a practice for non-compliance. For example, non or under immunized pediatric patients are a risk for other patients in a practice. Should these patients be discharged? What about a diabetic that refuses to take medications as prescribed, will not quit smoking, and habitually missing appointments? Where is the line drawn? In the meantime we waste time and valuable resources chasing people who do not what to help themselves.

    In terms or rates we sell to employer groups. Meaning if you are employed by that company, we, by law have to cover you. Premiums are set by gender make up, average age, and job. This is very, very different from individual plans. As I used to tell people, if you get your health insurance from an employer, and you have an issue to coverage, you need to talk to your HR people. They are the ones that picked it, and I am sure know in detail what is covered and what is not. After all that is how rates are set, which the employer pays, along with the employee.

  28. “People need to get over the fact that health insurance companies are in the business to make money. Guess, what? So is everyone else in healthcare (expect for the government the largest payer of healthcare) form nurses and doctors, to hospitals and drug companies, and the company that pays for all these services.”

    Interesting perspective. First, just as there are non-profit insurance companies, there are non profit hospital systems, so not all the players you mentioned are always in the business to make money.

    Second, pointing out the obvious fact that for profit health insurance companies maximize shareholder value by maximizing the money in: money out ratio and they are primarily motivated to maximize shareholder value and that this has consequences that shouldn’t necessarily be ignored (just because everybody else is in it for money too) isn’t something that should be ‘got over’. Seeing as there are other models for health care, it’s a valid point to bring up and it’s a valid question to ask, are the consequences and down sides of a health care model that depends primarily on private for profit insurance companies sufficient to make a different model better or is the profit motivated drive for efficiency and cost control the best way to go (or is there some hybrid option)?

  29. Rick says:

    Non-profit means little. Look no further than the non-profit Blue Cross Blue Shield of Michigan which has been under investigation for a number of issues. Including bullying of hospital systems to get lower rates, accumulation of a large war chest, and the tendency to lower rates to get new employer groups to drop other companies while raising costs on others.

    Then there is Spectrum Health hospital system in Grand Rapids, which stopped referring patients to the rehab hospital in town. It is assumed that they did so, because they were trying to buy that hospital out and they wanted a lower asking price. This system is also non-profit.

  30. ConspicuousCarl says:

    windrivenon 02 Sep 2011 at 9:43 am
    Further, neither I nor anyone else need know “what the supply curve is going to look like.”

    Not all supply curves are a straight line. If you don’t know the facts, you don’t know if increased price would have overcome other factors which you refuse to care about.

    It is quite enough as a general principle to know that the curve exists and the general form that it will take.

    No it isn’t. You are allowing your general knowledge to delude you into thinking that you know the answer in specific cases.

    Share with us if you will what exactly your point is.

    This sounds like the paranoid expectation that there must be an alternate motivation for pointing out your logical flaws. There isn’t. You are just using bad logic, and I am telling you.

  31. windriven says:

    @Carl

    I’m perfectly comfortable with my logic. The issue is and remains the role of price in the limited availability of certain drugs. I have stipulated that there may be a handful of situations where supply is limited by difficulty in obtaining some necessary component. Yet even in those cases appropriate supply side stimulation often overcomes those difficulties.

    I have taken a perfectly logical position – both theoretically and empirically – to a real world supply and demand situation. I have not argued for specific stimuli in order to yield specific increments of supply. Therefore, I do not need to know precisely what the supply curve ‘looks like.’

    Further, I have not allowed my knowledge, general or otherwise, delude me into thinking I know the answer in specific cases. The only specific case I referred to was acyclovir ointment – a case brought up by another commenter. I did my homework and verified that the acyclovir itself is readily available and that there are no general FDA actions ongoing involving acyclovir ointment.

    You have followed this blog long enough to know that I have erred from time to time in the past. When someone points out a valid error I immediately man up to it and learn from it. To name just two, Karl Withakay and Jann the Netherlander (sorry for not remembering your actual name) have pointed out logical and factual errors respectively that I’ve made. I thanked them both. And I meant it.

    If you have a meaningful criticism of something I’ve written I will read it with interest. I love learning as much today as I did 40 years ago. Just don’t put words in my mouth or ascribe to me concepts or intentions that aren’t mine.

    All this is a rather long-winded way of saying that I have no effing idea what I have written that you are taking exception to. Scott wrote that, “there’s no persuasive evidence that directly links reimbursement rates to supply issues.” I responded that the linkage between reimbursement and supply is a fundamental tenet of economic theory. If you have a problem with that let’s address it directly without wandering off into minutiae that were never part of the original exchange.

  32. windriven says:

    @Karl Withakay

    “Seeing as there are other models for health care, it’s a valid point to bring up and it’s a valid question to ask, are the consequences and down sides of a health care model that depends primarily on private for profit insurance companies sufficient to make a different model better or is the profit motivated drive for efficiency and cost control the best way to go (or is there some hybrid option)?”

    An interesting aspect of this is that, in my rather limited experience as a buyer, there is not a particular price advantage for not-for-profit insurers. I’ve just recently gone through this exercise with my company. We looked at proposals from eight health insurers, both profit and not-for-profit. We chose a Blue Cross Premera product because it best fit the parameters we wanted to offer. I don’t recall there being a stark difference in price between profit and not-for-profit providers (though in truth there are so many variables to the many plans that it is very difficult to match them up precisely).

    Managing health care delivery and its costs is a subject that cries for reasoned public debate. As we Boomers age, the pressure will only mount. We have to reimburse at rates that attract quality people to go through the rigors of medical school and to incent companies to research, develop and manufacture the drugs and devices necessary to deliver and improve medical care. On the other hand we already spend nearly one fifth of GDP on health care and, at least by crude measures, do not seem to achieve results as good as some countries that spend rather less.

    I hope that SBM will find some opportunities to address these issues as they bear directly on science based medicine.

  33. Windriven “Managing health care delivery and its costs is a subject that cries for reasoned public debate”

    This is American, dammit, we’ll have none of that elitist rhetoric here. :)

    Happy Labor Day, All

  34. ConspicuousCarl says:

    windriven on 03 Sep 2011 at 5:00 pm

    @Carl

    I’m perfectly comfortable with my logic. The issue is and remains the role of price in the limited availability of certain drugs.

    Yes. Gavura says there is no evidence that this is the case in the US. If there is, feel free to hand it over. I would normally even assume it to be likely, but you don’t know for sure without specific details.

    You declared that “The linkage between the two is axiomatic.” I am not putting words into your mouth, those are your words.

    The only specific case I referred to was acyclovir ointment – a case brought up by another commenter. I did my homework and verified that the acyclovir itself is readily available and that there are no general FDA actions ongoing involving acyclovir ointment.

    So the only specific example is not relevant. Empirical information supporting your position would be an example of one or more drugs which are NOT readily available because there is inadequate reimbursement.

    You have followed this blog long enough to know that I have erred from time to time in the past. When someone points out a valid error I immediately man up to it and learn from it.

    Sorry, but I don’t actually have much memory of your personal record here. If you have been wrong and admitted it, that’s great. But it doesn’t mean anything for this specific issue. There is a big chunk of irony in what you might be implying here.

    All this is a rather long-winded way of saying that I have no effing idea what I have written that you are taking exception to. Scott wrote that, “there’s no persuasive evidence that directly links reimbursement rates to supply issues.” I responded that the linkage between reimbursement and supply is a fundamental tenet of economic theory. If you have a problem with that let’s address it directly without wandering off into minutiae that were never part of the original exchange.

    You declared certainty in a general rule, and denied the need for specific evidence. Obviously I object to that logic. If you really can’t understand that this is what you “effing” said that I am objecting to, I don’t know where else to go with it.

    I am not the one wandering off into stories about other subjects, as you have just done with references to other people. If you don’t want to wander off, don’t.

    The ridiculous thing is that you could be right. I am not arguing against your conclusion, I am arguing against your logic. You can’t logically assume a specific cause in a specific case based on a general rule, and by your own statement above you have not provided even a single example of a single drug which is unavailable in the US due to poor reimbursement.

    Shortages can happen for a lot of different reasons. If a shortage is happening because of hoarding, increased reimbursement might actually make it worse. If a shortage exists only at the end of the chain, like a hospital or pharmacy, it could be due to low reimbursement stifling their ability to maintain inventory. Or it could be due to a mere lack of knowledge about the variation in demand for a specific drug, and they just failed to order enough in advance.

  35. Yesterday my Father-In-Law was told by his oncologist that the generic chemo-therapy drug they had been using is not available due to shortages. We are just hoping that it becomes available by the time he needs his next course of chemo.

    Here’s an interesting article in the NYT about oncology drug shortages.

    http://www.nytimes.com/2011/08/07/opinion/sunday/ezekiel-emanuel-cancer-patients.html?_r=1

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