- Email: [email protected]
Drug shortages: Canadian strategies for a complex global problem
ORIGINAL ARTICLE
Drug shortages: Canadian strategies for a complex global problem HealthPRO Procurement Services Inc.
Abstract—Drug shortages are a complex global problem. Increasingly intricate global supply chains, stricter drug regulations and current economic conditions, have exposed Canadians to greater shortage risks. That Canada represents only a limited share of the global drug market means that all stakeholders— hospitals, shared service organizations, group purchasing organizations, supplier networks and governments—must coordinate their efforts to find an effective market solution to recurring shortages. Based on ongoing collaboration between HealthPRO Procurement Services Inc. and multi-level national healthcare stakeholders, this article examines the primary causes of drug shortages in Canada, with recommendations for ensuring reliable sources of supply. Group Purchasing Organizations (GPOs) are vitally important in this regard. By building contracting processes that support market competition, GPOs can improve the reliability of supply for medically-necessary products, while creating a more flexible procurement strategy that supports competition, leverages innovation, creates value and adapts more readily to volatile global markets and changing patient needs.
W
hen it was announced that the production of injectable drugs was affected at Sandoz, Canada’s plant in Boucherville, Quebec in February 2012, it became clear to health professionals that the healthcare drug supply chain was facing a challenge. The production disruption, which resulted from a remediation process prescribed by Sandoz’s parent company, led to reduced availability of medically necessary singlesource and multisource injectable products, with no notice provided to hospitals and other healthcare providers. As the major supplier of injectable drugs in Canada, Sandoz’s stock of the critical injectable drugs impacted by the production disruption, and their alternates from other suppliers, went into alarmingly short supply within a matter of weeks. Alternative suppliers were introducing “fair share” allocation programs in response to some healthcare facilities stockpiling supplies. Drugs were put on allocation based on historical volumes purchased; however, historical volumes did not necessarily reflect current needs. Although drug shortages are not new – the number of drug shortages quadrupled between 2006 and 20101 – their frequency, duration, and impact continues to grow at an unprecedented rate. The 2012 Sandoz supply shortage brought the true scope of Canada’s drug shortage problem
From HealthPRO Procurement Services Inc. Correspondence: Kathleen Boyle, Vice President, Services, HealthPRO Procurement Services Inc. Mississauga, ON L5R 3G5, Canada. e-mail: [email protected] Prepared by HealthPRO Procurement Services Inc., one of the sponsors of this issue. Healthcare Management Forum 2012 25:S48 –S52 0840-4704/$ - see front matter © 2012 Canadian College of Health Leaders. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.hcmf.2012.07.017
to light. Together, healthcare stakeholders can work toward a lasting solution.
UNDERSTANDING DRUG SHORTAGES The US Food and Drug Administration (FDA) defines a drug shortage as “a situation in which the total supply of all clinically interchangeable versions of an FDA-regulated drug is inadequate to meet the current or projected demand at the patient level.”2 Drug shortages can be attributed to a complex combination of factors. These include increasing demand, a shortage of active ingredients, consolidated offshore production, regulatory issues and related remediation requirements in manufacturing processes in specific plants that have delayed production and delivery – as occurred at Sandoz, Canada. To propose effective solutions, it is important to first understand the following key factors that contribute to this complex global problem. It is important to consider too that every situation is different – each product on backorder and each shortage is driven by unique contributing factors. Of particular concern is the increase in the number and duration of drug shortages, as well as the increasing supply vulnerability of drugs used to treat or help prevent critical health conditions for which no other therapies exist.
An increasingly complex global supply chain A trend by manufacturers to outsource active pharmaceutical ingredients and raw materials has created intricate and increasingly less stable global supply chains (Fig. 1). Manufacturers are susceptible to shortages or delays at any of their global facilities. China and India, for example, supply 80% of the raw materials used by manufacturers in the United States.1 With a limited number of raw materialproducing countries, global drug manufacturers are more
DRUG SHORTAGES: CANADIAN STRATEGIES FOR A COMPLEX GLOBAL PROBLEM
Figure 1. Supply process and supply-chain entities. (In the literature, shortages are connected with practices of the drug supply chain entities. Reprinted with permission from the Ordre des Pharmaciens du Quebec.) (Colour version of figure is available on-line).
susceptible to shortages resulting from natural disasters. For example, protamine, an antidote to heparin, is currently unavailable around the world because of the 2011 tsunami in Japan, its principal producer.1
The move to consolidate production overseas The Canadian healthcare sector’s ability to respond to shortages is further hampered by suppliers’ move to consolidate production overseas (Fig. 2). Globalization has resulted in fewer manufacturers producing drugs across more jurisdictions and larger distribution areas, thereby opening manufacturers to greater compliance risk and leaving patients vulnerable to production stoppages or delays with fewer, if any, available alternatives. The Sandoz case shows how foreign regulatory bodies, in this case the FDA, can significantly affect production and local supply.
Increased demand without increased production As the need for medications grows, manufacturers are struggling to keep up with demand. Contributing factors can include rigid regulatory allotments of manufacturers’ active pharmaceutical ingredients, raw material shortages, and limited production capacity. This can be exacerbated
by supply chain entities that deliberately keep low levels of inventory. The result is often a “just-in-time” management response that prevents distributors and pharmacists from meeting unexpected spikes in demand.
Stricter drug regulations and improved quality control In early 2008, heparin, a widely used blood thinner, was made with a contaminated active pharmaceutical ingredient from China, and distributed in several countries, including the United States. The Chinese plant had skirted regulatory oversight by registering itself as a chemical company.3 As a result, the FDA has linked ⱖ81 deaths in the United States with the contaminated heparin.4 In response to this and several other tainted food and drug incidents over the past several years, in addition to the increasing challenge of counterfeit drug production, the FDA has increased the frequency and intensity of audits with a focus on complete traceability of all compounds. In several cases, strict FDA audits have impeded production of high-demand drugs at manufacturing facilities, contributing to temporary shortages. New requirements for pharmaceutical companies to validate manufacturing procedures for
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
S49
HealthPRO Procurement Services Inc.
and manage risk, especially where governmental action is needed to locate alternative supplies and/or expedite approval of possible substitute drugs. Federal, provincial, and territorial health ministers have yet to come together to develop a national action plan that ensures access to medically necessary drugs.
Economic conditions During periods of economic downturn, manufacturers rationalize product lines and often consolidate production to one plant. This can reduce reserves and increase vulnerability to production interruptions. As a result, stockpiling – ordering large quantities of a product when the price of that product is expected to go up – can also cause secondary shortages by cutting off the supply for other clients. Ironically, rumours of a shortage can alarm pharmacies and healthcare facilities into stockpiling drugs, thereby creating or contributing to potential shortages. In the wake of the Sandoz supply disruption, there is growing awareness that sole sourcing is not ideal.
Limited market share Figure 2. New shortage notifications by year, according to the FDA, American Society of Health-System Pharmacists, Urban Practice and Policy Forum, and Régie de l’Assurance Maladie du Québec. Reprinted with permission from the Ordre des Pharmaciens du Quebec.
drugs marketed before 1939 have also forced many drugs to be recalled from the market.1
Public policy directives on healthcare costs The drive to control healthcare costs in Canada has led to a leaner supply chain and tighter hospital, distributor, and manufacturer inventories across the country. Shrinking margins for manufacturers and distributors impact inventory and product availability. Shrinking margins can also negatively reshape the market, leading manufacturers to focus on the most profitable products. Group purchasing organizations (GPOs) contribute to decreasing margins by aggregating volumes through group purchasing power, which in turn reduces the price of products to healthcare institutions. Efforts must be made to support competition, especially for small- and medium-sized enterprises, within the market.
To this list of causes, it is important for Canadians to add the challenges of limited market share. Canada represents 3% of the global drug market.5 Of that 3%, Canadian hospitals represent just 10% – a small market opportunity for global manufacturers. The drug supply chain for Canada is extremely complex. There is no stakeholder in the supply chain that has not contributed to, or been complicit in, the problem of drug shortages, from global parent companies to local manufacturers and distributors to Health Canada, provincial authorities, shared service organizations, GPOs and hospitals alike. As the Sandoz, Canada supply shortage clearly illustrated, there is a critical need for each of these key stakeholder groups to contribute to a solution.
Health Canada may consider: ●
● ● ●
Poor government oversight Manufacturers are not currently compelled by law to notify the public of a drug product discontinuation or anticipated interruption. This can make it very difficult to coordinate measures among supply chain entities that prevent shortages S50
●
●
ensuring the standards of other jurisdictions do not take priority over the high quality standards in Canada; ensuring there are multiple suppliers of medically necessary drugs in Canada; mandating early warnings of anticipated supply disruptions; mandating early warnings of manufacturers’ plans to exit the market; exploring requirements for access to secondary suppliers of single source critical drugs, even if they are not already in Canada; and overseeing the establishment and sustained funding of a national drug shortage reporting system, so
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
DRUG SHORTAGES: CANADIAN STRATEGIES FOR A COMPLEX GLOBAL PROBLEM
healthcare providers and their patients may plan accordingly.
Global drug manufacturers must: ●
●
shoulder greater moral accountability for healthcare in Canada. A licence to make profits on Canadian healthcare should go hand in hand with a commitment to patient care in the form of a stable supply; and ensure that any required remediation plans do not negatively affect to a significant degree the production of supply for Canada.
Manufacturers and distributors must: ● ● ●
be more transparent with respect to potential supply disruptions; take responsibility for ensuring there is fair share distribution in place to prevent product hoarding; and have appropriate technology in place to handle an allotment approach effectively.
GPOs must: ●
● ● ●
take a national perspective that ensures that everyone is not relying on a single source or supplier for medically necessary drugs; create multi-award contracts that improve the security of supply for medically necessary products; encourage multiple suppliers in Canada to stay in Canada; and try to create a more attractive environment for new suppliers to enter Canada.
Provincial authorities should: ● ●
establish and monitor a fair share mandate; and continue sharing information regarding clinical alternatives with their fellow provinces.
Hospitals should: ●
maintain sufficient inventory of medically necessary drugs to mitigate the sudden impact of an acute shortage, while following a fair share approach and not stockpiling drugs during supply disruptions.
ENSURING RELIABLE SOURCES OF SUPPLY One clear and definitive challenge for Canadian healthcare is supporting a vibrant, competitive market capable of retaining and attracting suppliers. The 2012 Sandoz drug shortage illustrates that, although sole sourcing may be financially attractive, it is not an ideal strategy to encourage assurance of supply.
GPOs are vitally important in this regard. By building contracting processes that support market competition, such as split contract awards, GPOs can improve the reliability of supply for medically necessary products while creating a more flexible procurement strategy that supports competition, leverages innovation, creates value, and adapts more readily to volatile global markets and changing patient needs. By leveraging the considerable purchasing power of their members, GPOs can also introduce greater accountability and transparency to the market, especially through contracts that incant assurance of supply and market entry while discouraging disruptions. Several years ago, Canada’s national healthcare GPO, HealthPRO, noted increasing shortages and supply disruptions, and in 2010 proactively began revising its contracting strategy to better protect its pharmacy members. The revitalized strategy was developed with direct input from members and suppliers, and addresses many of the concerns raised by the Sandoz supply shortage. HealthPRO’s new contracting strategy is an example of a contracting approach that strives to strike a balance between competition, purchasing power, and a more reliable supply chain, while ensuring full compliance with contracting requirements. It aims to anticipate and avoid supply chain problems, fortify relationships with suppliers to better manage emerging shortages, and focus resources where they will have the most impact, all important elements of a corporate sector strategy to reduce the frequency and overall impact of drug shortages. For example, as part of its new strategy, HealthPRO has set more specific guidelines for suppliers facing unexpected product circumstances – one of the criteria measured through our vendor quality management plan. HealthPRO suppliers will now be contractually accountable for providing the following. ● ● ● ● ●
notifications about critical inventory levels for hospital-specific items; notifications and action plans for anticipated drug shortages; correction plans for drug shortages lasting ⬎60 days for hospital-specific items; notification regarding an intention to discontinue drug(s); and reasonable financial accountability for discontinued items.
The provisions in the strategy will be in effect for pharmacy contracts scheduled to begin September 1, 2012. A drug-contracting strategy that encourages competition and, where needed, market entry, will not only ease the impact of drug shortages on patient care, but will help to reduce the financial impact of shortages on Canada’s healthcare system. The cost of alternate drugs purchased outside of an established supply agreement is usually
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
S51
HealthPRO Procurement Services Inc.
higher than the facility’s contract cost. Emergency shipping costs to share product can unexpectedly add thousands onto healthcare sites’ exhausted bottom lines. Meanwhile, staff time invested in monitoring available inventory and searching for alternatives; researching, securing, or preparing new formulations or alternative therapies; and implementing temporary emergency procurement and/or distribution procedures each substantially add to the cost of shortages. For example, pharmacists and pharmacy technical assistants in the United States incur annual labour costs of US$216 million because of shortages; that is, before adding the cost differential of substitute drugs, which represented an additional US$415 million annually to the US healthcare system.5 Although increased contract pricing is not ideal, an increased contract price to award split contracts that ensure supply is significantly less than the cost of managing a drug shortage. It is important that GPOs work with industry to develop contracts that support safe and high quality patient care, while ensuring consistent supply. This requires listening, adapting, and evolving to meet the needs of today’s hospitals, healthcare providers, and patients.
CONCLUSION Drug shortages are a complex global problem. Increasingly intricate global supply chains, with everything from production to raw materials being outsourced overseas, have exposed Canadians to greater shortage risks. That Canada represents only a limited share of the global drug market means that all stakeholders – hospitals, shared service organizations, GPOs, supplier networks, and governments– must coordinate their efforts to find an effective market solution to recurring shortages. By working together on a national platform, these stakeholders can establish marketfriendly checks and balances that ensure better transparency and predictability within the healthcare system. In the long term, market interventions may prove more valuable than even strengthened government oversight, especially given the ongoing drive to control healthcare costs, which has resulted in leaner supply chains and tighter hospital, distributor, and manufacturer inventory levels across the country. Efforts to implement flexible, innovative contracting strategies, for example, represent a positive first step
S52
toward growing market opportunities for small and medium size enterprises. Adjusting its procurement strategies accordingly to encourage additional sources of supply reflects HealthPRO’s commitment to security of supply as well as quality and price. Despite the tremendous power of market innovations to add stability to such a complex global supply chain, federal, provincial, and territorial measures are nevertheless required to protect patient health and ensure access to medically necessary drugs. All governments, and all healthcare institutions and suppliers, are positioned to help the federal government to implement notification and early warning systems for anticipated supply disruptions and manufacturer’s plans to exit the market. Health Canada will continue to play an integral role in expediting the approval of alternatives when supply becomes scarce. However, market pressure on supply chains to make supply more predictable, and stronger national action from all governments, can only be so effective in the absence of sustainable models of communication between multilevel stakeholders. One of the important lessons of the Sandoz supply shortage is that there can be grave consequences to operating in isolation. Now, more than ever, it is imperative that we heed this lesson and work together to build an effective, long-term strategy that ensures a sustainable supply of medically necessary drugs for Canada in the future.
REFERENCES 1. Drug shortages: a public health issue that demands a coordinated response. Recommendations of the Working Committee on Drug Shortages. 2012. Available at: http://www.opq.org/ CMS/MediaFree/file/Publications/Memoires-positions/Rapportruptures-approvisionnement_ANG_02.pdf. Accessed September 25, 2012. 2. US Food and Drug Administration. 3. Why Canada is at risk of chronic drug shortages. The Globe and Mail. April 11, 2012: Available at: http://www.theglobeandmail. com/news/national/why-canada-is-at-risk-of-chronic-drugshortages/article4099257/. Accessed September 25, 2012. 4. U.S. Identifies tainted heparin in 11 countries. The New York Times. Apr 22 2008. 5. Industry Canada. Life sciences industry: pharmaceutical industry profile. Available at: http://www.ic.gc.ca/eic/site/lsg-pdsv. nsf/eng/h_hn01703.html. Accessed September 25, 2012.
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
Drug shortages: Canadian strategies for a complex global problem HealthPRO Procurement Services Inc.
Abstract—Drug shortages are a complex global problem. Increasingly intricate global supply chains, stricter drug regulations and current economic conditions, have exposed Canadians to greater shortage risks. That Canada represents only a limited share of the global drug market means that all stakeholders— hospitals, shared service organizations, group purchasing organizations, supplier networks and governments—must coordinate their efforts to find an effective market solution to recurring shortages. Based on ongoing collaboration between HealthPRO Procurement Services Inc. and multi-level national healthcare stakeholders, this article examines the primary causes of drug shortages in Canada, with recommendations for ensuring reliable sources of supply. Group Purchasing Organizations (GPOs) are vitally important in this regard. By building contracting processes that support market competition, GPOs can improve the reliability of supply for medically-necessary products, while creating a more flexible procurement strategy that supports competition, leverages innovation, creates value and adapts more readily to volatile global markets and changing patient needs.
W
hen it was announced that the production of injectable drugs was affected at Sandoz, Canada’s plant in Boucherville, Quebec in February 2012, it became clear to health professionals that the healthcare drug supply chain was facing a challenge. The production disruption, which resulted from a remediation process prescribed by Sandoz’s parent company, led to reduced availability of medically necessary singlesource and multisource injectable products, with no notice provided to hospitals and other healthcare providers. As the major supplier of injectable drugs in Canada, Sandoz’s stock of the critical injectable drugs impacted by the production disruption, and their alternates from other suppliers, went into alarmingly short supply within a matter of weeks. Alternative suppliers were introducing “fair share” allocation programs in response to some healthcare facilities stockpiling supplies. Drugs were put on allocation based on historical volumes purchased; however, historical volumes did not necessarily reflect current needs. Although drug shortages are not new – the number of drug shortages quadrupled between 2006 and 20101 – their frequency, duration, and impact continues to grow at an unprecedented rate. The 2012 Sandoz supply shortage brought the true scope of Canada’s drug shortage problem
From HealthPRO Procurement Services Inc. Correspondence: Kathleen Boyle, Vice President, Services, HealthPRO Procurement Services Inc. Mississauga, ON L5R 3G5, Canada. e-mail: [email protected] Prepared by HealthPRO Procurement Services Inc., one of the sponsors of this issue. Healthcare Management Forum 2012 25:S48 –S52 0840-4704/$ - see front matter © 2012 Canadian College of Health Leaders. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.hcmf.2012.07.017
to light. Together, healthcare stakeholders can work toward a lasting solution.
UNDERSTANDING DRUG SHORTAGES The US Food and Drug Administration (FDA) defines a drug shortage as “a situation in which the total supply of all clinically interchangeable versions of an FDA-regulated drug is inadequate to meet the current or projected demand at the patient level.”2 Drug shortages can be attributed to a complex combination of factors. These include increasing demand, a shortage of active ingredients, consolidated offshore production, regulatory issues and related remediation requirements in manufacturing processes in specific plants that have delayed production and delivery – as occurred at Sandoz, Canada. To propose effective solutions, it is important to first understand the following key factors that contribute to this complex global problem. It is important to consider too that every situation is different – each product on backorder and each shortage is driven by unique contributing factors. Of particular concern is the increase in the number and duration of drug shortages, as well as the increasing supply vulnerability of drugs used to treat or help prevent critical health conditions for which no other therapies exist.
An increasingly complex global supply chain A trend by manufacturers to outsource active pharmaceutical ingredients and raw materials has created intricate and increasingly less stable global supply chains (Fig. 1). Manufacturers are susceptible to shortages or delays at any of their global facilities. China and India, for example, supply 80% of the raw materials used by manufacturers in the United States.1 With a limited number of raw materialproducing countries, global drug manufacturers are more
DRUG SHORTAGES: CANADIAN STRATEGIES FOR A COMPLEX GLOBAL PROBLEM
Figure 1. Supply process and supply-chain entities. (In the literature, shortages are connected with practices of the drug supply chain entities. Reprinted with permission from the Ordre des Pharmaciens du Quebec.) (Colour version of figure is available on-line).
susceptible to shortages resulting from natural disasters. For example, protamine, an antidote to heparin, is currently unavailable around the world because of the 2011 tsunami in Japan, its principal producer.1
The move to consolidate production overseas The Canadian healthcare sector’s ability to respond to shortages is further hampered by suppliers’ move to consolidate production overseas (Fig. 2). Globalization has resulted in fewer manufacturers producing drugs across more jurisdictions and larger distribution areas, thereby opening manufacturers to greater compliance risk and leaving patients vulnerable to production stoppages or delays with fewer, if any, available alternatives. The Sandoz case shows how foreign regulatory bodies, in this case the FDA, can significantly affect production and local supply.
Increased demand without increased production As the need for medications grows, manufacturers are struggling to keep up with demand. Contributing factors can include rigid regulatory allotments of manufacturers’ active pharmaceutical ingredients, raw material shortages, and limited production capacity. This can be exacerbated
by supply chain entities that deliberately keep low levels of inventory. The result is often a “just-in-time” management response that prevents distributors and pharmacists from meeting unexpected spikes in demand.
Stricter drug regulations and improved quality control In early 2008, heparin, a widely used blood thinner, was made with a contaminated active pharmaceutical ingredient from China, and distributed in several countries, including the United States. The Chinese plant had skirted regulatory oversight by registering itself as a chemical company.3 As a result, the FDA has linked ⱖ81 deaths in the United States with the contaminated heparin.4 In response to this and several other tainted food and drug incidents over the past several years, in addition to the increasing challenge of counterfeit drug production, the FDA has increased the frequency and intensity of audits with a focus on complete traceability of all compounds. In several cases, strict FDA audits have impeded production of high-demand drugs at manufacturing facilities, contributing to temporary shortages. New requirements for pharmaceutical companies to validate manufacturing procedures for
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
S49
HealthPRO Procurement Services Inc.
and manage risk, especially where governmental action is needed to locate alternative supplies and/or expedite approval of possible substitute drugs. Federal, provincial, and territorial health ministers have yet to come together to develop a national action plan that ensures access to medically necessary drugs.
Economic conditions During periods of economic downturn, manufacturers rationalize product lines and often consolidate production to one plant. This can reduce reserves and increase vulnerability to production interruptions. As a result, stockpiling – ordering large quantities of a product when the price of that product is expected to go up – can also cause secondary shortages by cutting off the supply for other clients. Ironically, rumours of a shortage can alarm pharmacies and healthcare facilities into stockpiling drugs, thereby creating or contributing to potential shortages. In the wake of the Sandoz supply disruption, there is growing awareness that sole sourcing is not ideal.
Limited market share Figure 2. New shortage notifications by year, according to the FDA, American Society of Health-System Pharmacists, Urban Practice and Policy Forum, and Régie de l’Assurance Maladie du Québec. Reprinted with permission from the Ordre des Pharmaciens du Quebec.
drugs marketed before 1939 have also forced many drugs to be recalled from the market.1
Public policy directives on healthcare costs The drive to control healthcare costs in Canada has led to a leaner supply chain and tighter hospital, distributor, and manufacturer inventories across the country. Shrinking margins for manufacturers and distributors impact inventory and product availability. Shrinking margins can also negatively reshape the market, leading manufacturers to focus on the most profitable products. Group purchasing organizations (GPOs) contribute to decreasing margins by aggregating volumes through group purchasing power, which in turn reduces the price of products to healthcare institutions. Efforts must be made to support competition, especially for small- and medium-sized enterprises, within the market.
To this list of causes, it is important for Canadians to add the challenges of limited market share. Canada represents 3% of the global drug market.5 Of that 3%, Canadian hospitals represent just 10% – a small market opportunity for global manufacturers. The drug supply chain for Canada is extremely complex. There is no stakeholder in the supply chain that has not contributed to, or been complicit in, the problem of drug shortages, from global parent companies to local manufacturers and distributors to Health Canada, provincial authorities, shared service organizations, GPOs and hospitals alike. As the Sandoz, Canada supply shortage clearly illustrated, there is a critical need for each of these key stakeholder groups to contribute to a solution.
Health Canada may consider: ●
● ● ●
Poor government oversight Manufacturers are not currently compelled by law to notify the public of a drug product discontinuation or anticipated interruption. This can make it very difficult to coordinate measures among supply chain entities that prevent shortages S50
●
●
ensuring the standards of other jurisdictions do not take priority over the high quality standards in Canada; ensuring there are multiple suppliers of medically necessary drugs in Canada; mandating early warnings of anticipated supply disruptions; mandating early warnings of manufacturers’ plans to exit the market; exploring requirements for access to secondary suppliers of single source critical drugs, even if they are not already in Canada; and overseeing the establishment and sustained funding of a national drug shortage reporting system, so
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
DRUG SHORTAGES: CANADIAN STRATEGIES FOR A COMPLEX GLOBAL PROBLEM
healthcare providers and their patients may plan accordingly.
Global drug manufacturers must: ●
●
shoulder greater moral accountability for healthcare in Canada. A licence to make profits on Canadian healthcare should go hand in hand with a commitment to patient care in the form of a stable supply; and ensure that any required remediation plans do not negatively affect to a significant degree the production of supply for Canada.
Manufacturers and distributors must: ● ● ●
be more transparent with respect to potential supply disruptions; take responsibility for ensuring there is fair share distribution in place to prevent product hoarding; and have appropriate technology in place to handle an allotment approach effectively.
GPOs must: ●
● ● ●
take a national perspective that ensures that everyone is not relying on a single source or supplier for medically necessary drugs; create multi-award contracts that improve the security of supply for medically necessary products; encourage multiple suppliers in Canada to stay in Canada; and try to create a more attractive environment for new suppliers to enter Canada.
Provincial authorities should: ● ●
establish and monitor a fair share mandate; and continue sharing information regarding clinical alternatives with their fellow provinces.
Hospitals should: ●
maintain sufficient inventory of medically necessary drugs to mitigate the sudden impact of an acute shortage, while following a fair share approach and not stockpiling drugs during supply disruptions.
ENSURING RELIABLE SOURCES OF SUPPLY One clear and definitive challenge for Canadian healthcare is supporting a vibrant, competitive market capable of retaining and attracting suppliers. The 2012 Sandoz drug shortage illustrates that, although sole sourcing may be financially attractive, it is not an ideal strategy to encourage assurance of supply.
GPOs are vitally important in this regard. By building contracting processes that support market competition, such as split contract awards, GPOs can improve the reliability of supply for medically necessary products while creating a more flexible procurement strategy that supports competition, leverages innovation, creates value, and adapts more readily to volatile global markets and changing patient needs. By leveraging the considerable purchasing power of their members, GPOs can also introduce greater accountability and transparency to the market, especially through contracts that incant assurance of supply and market entry while discouraging disruptions. Several years ago, Canada’s national healthcare GPO, HealthPRO, noted increasing shortages and supply disruptions, and in 2010 proactively began revising its contracting strategy to better protect its pharmacy members. The revitalized strategy was developed with direct input from members and suppliers, and addresses many of the concerns raised by the Sandoz supply shortage. HealthPRO’s new contracting strategy is an example of a contracting approach that strives to strike a balance between competition, purchasing power, and a more reliable supply chain, while ensuring full compliance with contracting requirements. It aims to anticipate and avoid supply chain problems, fortify relationships with suppliers to better manage emerging shortages, and focus resources where they will have the most impact, all important elements of a corporate sector strategy to reduce the frequency and overall impact of drug shortages. For example, as part of its new strategy, HealthPRO has set more specific guidelines for suppliers facing unexpected product circumstances – one of the criteria measured through our vendor quality management plan. HealthPRO suppliers will now be contractually accountable for providing the following. ● ● ● ● ●
notifications about critical inventory levels for hospital-specific items; notifications and action plans for anticipated drug shortages; correction plans for drug shortages lasting ⬎60 days for hospital-specific items; notification regarding an intention to discontinue drug(s); and reasonable financial accountability for discontinued items.
The provisions in the strategy will be in effect for pharmacy contracts scheduled to begin September 1, 2012. A drug-contracting strategy that encourages competition and, where needed, market entry, will not only ease the impact of drug shortages on patient care, but will help to reduce the financial impact of shortages on Canada’s healthcare system. The cost of alternate drugs purchased outside of an established supply agreement is usually
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012
S51
HealthPRO Procurement Services Inc.
higher than the facility’s contract cost. Emergency shipping costs to share product can unexpectedly add thousands onto healthcare sites’ exhausted bottom lines. Meanwhile, staff time invested in monitoring available inventory and searching for alternatives; researching, securing, or preparing new formulations or alternative therapies; and implementing temporary emergency procurement and/or distribution procedures each substantially add to the cost of shortages. For example, pharmacists and pharmacy technical assistants in the United States incur annual labour costs of US$216 million because of shortages; that is, before adding the cost differential of substitute drugs, which represented an additional US$415 million annually to the US healthcare system.5 Although increased contract pricing is not ideal, an increased contract price to award split contracts that ensure supply is significantly less than the cost of managing a drug shortage. It is important that GPOs work with industry to develop contracts that support safe and high quality patient care, while ensuring consistent supply. This requires listening, adapting, and evolving to meet the needs of today’s hospitals, healthcare providers, and patients.
CONCLUSION Drug shortages are a complex global problem. Increasingly intricate global supply chains, with everything from production to raw materials being outsourced overseas, have exposed Canadians to greater shortage risks. That Canada represents only a limited share of the global drug market means that all stakeholders – hospitals, shared service organizations, GPOs, supplier networks, and governments– must coordinate their efforts to find an effective market solution to recurring shortages. By working together on a national platform, these stakeholders can establish marketfriendly checks and balances that ensure better transparency and predictability within the healthcare system. In the long term, market interventions may prove more valuable than even strengthened government oversight, especially given the ongoing drive to control healthcare costs, which has resulted in leaner supply chains and tighter hospital, distributor, and manufacturer inventory levels across the country. Efforts to implement flexible, innovative contracting strategies, for example, represent a positive first step
S52
toward growing market opportunities for small and medium size enterprises. Adjusting its procurement strategies accordingly to encourage additional sources of supply reflects HealthPRO’s commitment to security of supply as well as quality and price. Despite the tremendous power of market innovations to add stability to such a complex global supply chain, federal, provincial, and territorial measures are nevertheless required to protect patient health and ensure access to medically necessary drugs. All governments, and all healthcare institutions and suppliers, are positioned to help the federal government to implement notification and early warning systems for anticipated supply disruptions and manufacturer’s plans to exit the market. Health Canada will continue to play an integral role in expediting the approval of alternatives when supply becomes scarce. However, market pressure on supply chains to make supply more predictable, and stronger national action from all governments, can only be so effective in the absence of sustainable models of communication between multilevel stakeholders. One of the important lessons of the Sandoz supply shortage is that there can be grave consequences to operating in isolation. Now, more than ever, it is imperative that we heed this lesson and work together to build an effective, long-term strategy that ensures a sustainable supply of medically necessary drugs for Canada in the future.
REFERENCES 1. Drug shortages: a public health issue that demands a coordinated response. Recommendations of the Working Committee on Drug Shortages. 2012. Available at: http://www.opq.org/ CMS/MediaFree/file/Publications/Memoires-positions/Rapportruptures-approvisionnement_ANG_02.pdf. Accessed September 25, 2012. 2. US Food and Drug Administration. 3. Why Canada is at risk of chronic drug shortages. The Globe and Mail. April 11, 2012: Available at: http://www.theglobeandmail. com/news/national/why-canada-is-at-risk-of-chronic-drugshortages/article4099257/. Accessed September 25, 2012. 4. U.S. Identifies tainted heparin in 11 countries. The New York Times. Apr 22 2008. 5. Industry Canada. Life sciences industry: pharmaceutical industry profile. Available at: http://www.ic.gc.ca/eic/site/lsg-pdsv. nsf/eng/h_hn01703.html. Accessed September 25, 2012.
Healthcare Management Forum ● Forum Gestion des soins de sante´ – Fall/Automne 2012