[Senate Hearing 112-885]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 112-885
 
  PRESCRIPTION DRUG SHORTAGES: EXAMINING A PUBLIC HEALTH CONCERN AND 
                          POTENTIAL SOLUTIONS 

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON

  EXAMINING THE PRESCRIPTION DRUG SHORTAGES, FOCUSING ON EXAMINING A 
PUBLIC HEALTH CONCERN AND POTENTIAL SOLUTIONS, AND IF THE FOOD AND DRUG 
       ADMINISTRATION'S ABILITY TO RESPOND SHOULD BE STRENGTHENED

                               __________

                           DECEMBER 15, 2011

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions

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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       TOM HARKIN, Iowa, Chairman

BARBARA A. MIKULSKI, Maryland              MICHAEL B. ENZI, Wyoming
JEFF BINGAMAN, New Mexico                  LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington                   RICHARD BURR, North Carolina
BERNARD SANDERS (I), Vermont               JOHNNY ISAKSON, Georgia
ROBERT P. CASEY, JR., Pennsylvania         RAND PAUL, Kentucky
KAY R. HAGAN, North Carolina               ORRIN G. HATCH, Utah
JEFF MERKLEY, Oregon                       JOHN McCAIN, Arizona
AL FRANKEN, Minnesota                      PAT ROBERTS, Kansas
MICHAEL F. BENNET, Colorado                LISA MURKOWSKI, Alaska
SHELDON WHITEHOUSE, Rhode Island           MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut
                                       
                                       

                      Daniel Smith, Staff Director

                  Pamela Smith, Deputy Staff Director

     Frank Macchiarola, Republican Staff Director and Chief Counsel

                                  (ii)



                            C O N T E N T S

                               __________

                               STATEMENTS

                      THURSDAY, DECEMBER 15, 2011

                                                                   Page

                           Committee Members

Harkin, Hon. Tom, Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     2
Kirk, Hon. Mark, a U.S. Senator from the State of Illinois.......     8
Franken, Hon. Al, a U.S. Senator from the State of Minnesota.....     9
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon......     9
Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia...    10
Bennet, Hon. Michael F., a U.S. Senator from the State of 
  Colorado.......................................................    10
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico.    11
Blumenthal, Hon. Richard, a U.S. Senator from the State of 
  Connecticut....................................................    11
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode 
  Island.........................................................    12
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of 
  Pennsylvania...................................................    40
    Prepared statement...........................................    41
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    43
Hagan, Hon. Kay R., a U.S. Senator from the State of North 
  Carolina.......................................................    45
Mikulski, Hon. Barbara A., a U.S. Senator from the State of 
  Maryland.......................................................    47
    Prepared statement...........................................    47

                          Guest Senate Member

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota..     3
    Prepared statement...........................................     5

                           Witnesses--Panel I

Glied, Sherry, Ph.D., Assistant Secretary For Planning and 
  Evaluation, Department of Health and Human Services, 
  Washington, DC.................................................    13
    Prepared statement...........................................    14
Kweder, Sandra, M.D., Deputy Director, Office of New Drugs, FDA, 
  Washington, DC.................................................    18
    Prepared statement...........................................    21

                          Witnesses--Panel II

Crosse, Marcia G., Ph.D., Director, Health Care, Government 
  Accountability Office, Washington, DC..........................    49
    Prepared statement...........................................    51
Aitken, Murray, Senior Vice President, Healthcare Insight, IMS, 
  Parsippany, NJ.................................................    56
    Prepared statement...........................................    57
Neas, Ralph G., J.D., Chief Executive Officer, Generic 
  Pharmaceutical Association, Washington, DC.....................    66
    Prepared statement...........................................    67
Maris, John M., M.D., Chief, Division of Oncology, Children's 
  Hospital of Philadelphia, PA...................................    72
    Prepared statement...........................................    74

                                 (iii)
                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Jerry A. Cohen, M.D., President, American Society of 
      Anesthesiologists; and Arnold J. Berry, M.D., M.P.H., Vice 
      President for Scientific Affairs, American Society of 
      Anesthesiologists, Washington, DC..........................    85
    Response by the Department of Health & Human Services, Food 
      and Drug Administration to questions of:
        Senator Casey............................................    87
        Senator Blumenthal.......................................    90
        Senator Enzi.............................................    91
        Senator Burr.............................................    93
        Senator Hatch............................................    93




  PRESCRIPTION DRUG SHORTAGES: EXAMINING A PUBLIC HEALTH CONCERN AND 
                          POTENTIAL SOLUTIONS

                              ----------                              


                      THURSDAY, DECEMBER 15, 2011

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:05 a.m. in 
Room 106, Dirksen Senate Office Building, Hon. Tom Harkin, 
chairman of the committee, presiding.
    Present: Senators Harkin, Mikulski, Bingaman, Casey, Hagan, 
Merkley, Franken, Bennet, Whitehouse, Blumenthal, Enzi, 
Isakson, Hatch, and Kirk.
    Also Present: Senator Klobuchar.

                  Opening Statement of Senator Harkin

    The Chairman. Good morning. The Senate Committee on Health, 
Education, Labor, and Pensions will come to order.
    Today's hearing focuses on a serious public health issue in 
the United States. That's the growing problem of prescription 
drug shortages. For the past several years, hospitals across 
the country have experienced an increasing number of shortages 
of life-sustaining prescription drugs. Today we're going to 
examine the cause of the shortages and explore potential 
solutions.
    The harsh reality is, the problem is getting dramatically 
worse. The number of prescription drug shortages in the United 
States has tripled over the past 5 years. Over 80 percent of 
these shortages involve generic sterile injectables, including 
critical products used for chemotherapy, emergency medicine, 
anesthesia, and intravenous feeds. Many of these products are 
absolutely essential for the treatment of serious diseases, and 
shortages in anesthetic products are adversely affecting even 
the most routine surgeries.
    As hospitals encounter difficulties in securing an adequate 
supply of critical drugs, it forces doctors to ration their 
supply of medication, delay medical procedures, and use 
alternative products that may have unwanted side effects. In 
some instances, drug shortages also compel medical 
practitioners to rely on foreign versions of drugs that have 
not been reviewed by the FDA and not approved for use in the 
United States.
    For patients, drug shortages can literally be a matter of 
life or death. To cite one example, Al Wegner of Ionia, IA 
wrote to inform me that a drug he received to treat his colon 
and prostate cancer is now in shortage and will run out by the 
end of the year.
    In May, Senator Enzi and I convened a bipartisan working 
group to evaluate the issue of shortages and identify potential 
legislative solutions. Between the work of that group and our 
discussions today, I'm hopeful that we can agree on meaningful 
bipartisan solutions to address this complex problem.
    In May, along with Senators Casey and Blumenthal, I wrote 
to the Government Accountability Office to request a report on 
the drug shortage problem and potential solutions. GAO issued 
its report this morning. Marcia Crosse, Director of GAO's 
health care team, is here to discuss that, including its 
recommendations.
    I also look forward to hearing from our other witnesses who 
bring to this discussion a wide range of experiences and 
perspectives, and I thank you all for being here.
    I also want to acknowledge and thank our distinguished 
Ranking Member, who has been a key leader here in the Senate in 
addressing this issue.
    I will yield to Senator Enzi for an opening statement.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman. Thanks for having 
this hearing.
    As a result of recent drug shortages, patients all over the 
United States are forced to delay their treatment or use 
second-best alternatives. Clinical trials that use these drugs 
are being stalled, preventing possible new treatments from 
coming to market. The pharmaceuticals in shortage are complex 
to manufacture and treat a variety of conditions in different 
settings. They have always been vulnerable to shortage. 
However, these shortages are now more widespread.
    Currently, FDA lists over 200 products in short supply. 
These shortages result in increased costs for patients, the 
Government providers, researchers, and worse outcomes for 
patients. Generic drugs make up the majority of drugs in 
shortage, and many are inexpensive. While we must move as 
quickly as possible to get these life-saving drugs to the 
patients that need them, it's important that we understand the 
causes that lead to this tragic problem.
    There are conflicting opinions on how economics, 
regulation, and supply-chain management contribute to the 
shortages we see today. I understand this is a complex, 
multifaceted issue, and I look forward to hearing from all our 
witnesses today to help clarify the root causes and describe 
possible next steps.
    Only once we understand the causes should we craft a 
solution. There are many alternative policy options being 
discussed. My colleague, Senator Klobuchar, and Senator Hatch 
have been leaders in this area, but their proposals address 
very different problems. We must keep in mind possible 
unintended consequences as we move forward.
    My staff has been participating on a bipartisan working 
group for months, meeting with the stakeholders, investigating 
the causes, and developing solutions. I look forward to seeing 
the group's proposal in the next few months. I understand that 
the generic pharmaceutical industry is also working to come up 
with a solution to address supply interruptions as well, and I 
look forward to hearing more about that today.
    There is bipartisan desire to implement a solution that 
will not only mitigate shortages in the short-term but address 
underlying causes so we don't find ourselves in this tragic 
situation again. I look forward to working with my colleagues 
on and off the committee to do this as quickly as possible 
without compromising the quality of the policy.
    I'm concerned, however, that the FDA could be doing more to 
address these shortages now. The Government Accountability 
Organization says their management remains a barrier, and new 
record-keeping methods would not improve communication within 
the agency. Further, GAO says there has not been a systematic 
review of all applications currently waiting for approval to 
see if they are relevant to the shortages.
    As a first step, FDA should expedite the review of any 
application for drugs in shortage. I find it troubling that we 
do not know how many applications relevant to shortages are 
waiting for FDA review and look forward to exploring any 
barriers that are currently preventing the agency from 
identifying and expediting these applications.
    That being said, I want to commend the work of the Drug 
Shortages Office of the Food and Drug Administration. Until 
recently, this office only had four members. Yet, when provided 
information about shortages, they have been able to assist in 
communication and finding solutions with the manufacturers in 
some cases. I only hope that this sort of collaboration among 
offices in FDA and industry will continue after the public 
health emergency is resolved.
    Looking back a few years, multiple companies shut down 
capacity at the same time. Increased coordination may have 
helped to prevent some of the situations we find ourselves in 
today.
    Thank you for convening this important hearing, and I look 
forward to discussing what steps we can take to solve this 
tragic problem.
    The Chairman. Thank you very much, Senator Enzi.
    We'd like to start off by welcoming our esteemed colleague, 
Senator Klobuchar from Minnesota. She's been a leader in this 
effort and has introduced an important bill on this issue with 
Senator Casey. It's called the Preserving Access to Life-Saving 
Medications Act.
    Senator Klobuchar, we're pleased to have you here this 
morning. Your statement, of course, will be made a part of the 
record in its entirety, and please proceed as you so desire.

                     Statement of Senator Klobuchar

    Senator Klobuchar. Thank you very much, Chairman Harkin, 
Ranking Member Enzi, Senator Kirk. Thank you very much for 
starting the working group and being devoted to doing something 
about this issue. It's something that experts are seeing as an 
unprecedented shortage in drugs, forcing some patients to delay 
their treatments, using unproven alternatives or, sadly in some 
cases, drug shortages have even resulted in patient deaths.
    Over a year ago I heard about this first. I think Senator 
Harkin, from the Midwest, understands our people are loud and 
call their officials when things go wrong, and I couldn't 
believe the number of pharmacists, and also doctors and patient 
groups, that came to our office seeking help. And as the year 
went on, I think more and more of my colleagues heard about 
this from people in their own States.
    Just a few months ago I met a young boy named Axel Zirbes. 
Alex Zirbes is a little 4-year-old boy with bright eyes and a 
big smile. He also happens to have no hair on his head, and 
that's because he's being treated for leukemia. When he was 
scheduled to start chemotherapy earlier this year, Axel's 
parents learned that an essential drug, cytarabine, was in 
short supply and might not be available for their son. 
Obviously, this threw them into a panic. They started calling 
themselves all over the country. The pharmacists were trying, 
the doctors were trying, and they actually made plans to go to 
Canada so he could get his chemotherapy treatment.
    Well, at the last minute, the hospital was able to secure 
the medication from a pharmacy that still had a supply. But I 
think you all know, Axel and his parents are not alone, and not 
every story has turned out as good as that one.
    As you know, there were 178 drug shortages reported in 2010 
and already 231 reported as of this November. Look at that 
dramatic increase. When you go back 5 years, there were only 55 
drug shortages. So the facts speak for themselves.
    For some of these drugs, no substitutes are available. Or, 
if they are, they're less effective. A survey conducted by the 
American Hospital Association showed that nearly 100 percent of 
their hospitals experienced a shortage.
    It is clear that there are a large number of overlapping 
factors, as Senator Enzi discussed, that are resulting in 
unprecedented shortages. Experts cite a number of factors. 
Market consolidation and poor business incentives, 
manufacturing problems and production delays, unexpected 
increases in demand for a drug, inability to procure raw 
materials, and even the influence, the very unfortunate 
influence as of late, of a ``gray market.''
    However, when drugs are made by only a few companies, a 
decision by one drug maker can have a large impact.
    Therefore, to help correct a poor market environment or to 
prevent ``gray market'' drugs from contaminating our medication 
supply chain, we must address the drug shortage problem at its 
root.
    As was mentioned, I introduced the Preserving Access to 
Life-Saving Medications Act with Senator Casey of Pennsylvania. 
Susan Collins joined us, and many others, and so the bill now 
has bipartisan support. The bill would require drug 
manufacturers to provide early notification to the FDA whenever 
there is a factor that may lead to a shortage.
    And I would agree with Senator Enzi that it's very 
complicated to look at what these causes are and to figure out 
the long-term solutions. But I believe that the short-term 
solution has already been proven to work. When you look at the 
numbers with the FDA, in the last 2 years the FDA, with early 
notification and more information, has successfully prevented 
137 drug shortages.
    So when we went to them to try to figure out what we can do 
to at least address this immediate problem, they said, ``Look, 
what we're doing works, but we don't really necessarily have 
the tools and the authority to be able to do this across the 
board,'' and that's why we came up with the idea of doing it 
beyond orphan drugs to doing it sooner so that they get the 
information sooner, because the sooner they get the 
information, the more they're going to be able to respond and 
get something done.
    In addition to adding more sponsors and the good working 
group that you've set up since the time that we introduced this 
bill, two major things have happened. The administration, the 
President has endorsed this bill. The House has taken on a very 
similar bill, led by Representative DeGette. The President's 
Executive order, I should note, took steps toward advancing the 
goals. But he made clear at the same time that Congress must 
still act in order to protect patients and ensure consumers 
have access to these life-saving medications.
    The second major change is that today the FDA is announcing 
a rule that would expand shortage notification for sole-source 
manufacturers. This is clearly a step in the right direction, 
but I would argue we still need to get this legislation done 
because we have the issue that we have manufacturers that are 
not sole-source that have also been involved in drug shortage 
situations. So there is good reason to continue to work to pass 
this legislation.
    And then it also has been noted by both the Chairman and 
the Ranking Member that we need to continue the work of the 
working group to look at the long-term solutions to this 
problem.
    I would just add when you look at the eyes of that little 
4-year-old balding boy and you realize that his whole family 
was put in a panic, or you meet some of the patients that I've 
met, or the pharmacists who are already under-staffed and are 
dealing with very difficult times in health care, the last 
thing we want to do is to have hospitals, doctors, or 
pharmacists running around literally spending half a day trying 
to find one dose of a medication. This is no way to run a 
railroad.
    I really appreciate the committee's willingness to look at 
this issue. I would urge you to move our legislation as soon as 
possible as a short-term solution, and then continue the long-
term work that needs to be done to get at the underlying root 
causes of this problem.
    Thank you very much, Mr. Chairman, for allowing me to speak 
today. Thank you for all the Senators that have come today. We 
now have six of you here, so I know we can solve this problem, 
and I look forward to working with all of you. Thank you very 
much.
    [The prepared statement of Senator Klobuchar follows:]

                Prepared Statement of Senator Klobuchar

    Chairman Harkin, Ranking Member Enzi, and my fellow 
colleagues on the HELP Committee--I am glad that this hearing 
is being held today to discuss causes and solutions to the drug 
shortage crisis. I appreciate the opportunity to join you all 
and briefly share my thoughts and experiences after having 
worked on this issue for the past year.
    The country is facing what experts are calling a ``crisis'' 
with ``unprecedented'' shortages for a record number of 
essential drugs. Drug shortages have impacted individuals all 
across the country--forcing some patients to delay their life-
saving treatments or use unproven, less-effective alternatives. 
In some cases, drug shortages have even resulted in patient 
deaths.
    Because of the urgency of this issue, this morning the FDA 
announced an Interim Final Rule that will require manufacturers 
to provide early notification to the FDA so the agency can work 
with manufacturers, hospitals, pharmacists, and patients to 
find ways to prevent drug shortages.
    Having this information will help FDA take steps necessary 
to find appropriate alternatives, aid manufacturers in 
correcting manufacturing problems, and help providers and 
patients maintain the care they need and deserve.
    The legislation that I introduced with Senator Casey, The 
Preserving Access to Life-Saving Medications Act, would require 
drug manufacturers to provide early notification to the FDA 
whenever there is a factor that may lead to a shortage. And it 
is helpful that the FDA followed our leadership and took the 
steps they did today to speed this process along.
    This is something I have been working on for over a year 
when I first heard from hospitals, pharmacists, and patients 
from Minnesota that they were facing shortages in essential 
medications--specifically to chemotherapy drugs. Their urgency 
caused me to send a letter to FDA Commissioner Hamburg urging 
the FDA to take actions to address this public health crisis.
    Over the next few months, I continued to receive calls from 
constituents asking for help in finding medications in short 
supply. I worked with manufacturers, stakeholders, and the FDA 
to try to find an appropriate solution to ensure that patients 
continued to receive the care they needed and deserved.
    Just a few months ago, I met a young boy named Axel Zirbes. 
Axel Zirbes is a cute 4-year-old boy from the Twin Cities with 
bright eyes and a big smile. He also happens to have no hair on 
his head. That's because Axel is being treated for leukemia.
    When he was scheduled to start chemotherapy earlier this 
year, Axel's parents learned that an essential drug, cytarabine 
(sye-TARE-a-been), was in short supply and might not be 
available for their son. Understandably, they were thrown into 
a panic and desperately looked for any available alternatives. 
They even prepared to take Axel to Canada, where cytarabine 
(sye-TARE-a-been) was still readily available.
    Fortunately, it didn't come to that. At the last minute, 
the hospital was able to secure the medication from a pharmacy 
that still had a supply.
    But Axel and his parents are not alone.
    As you know, there were 178 drug shortages reported in 2010 
and already 231 reported as of this November--a dramatic 
increase from 55 just 5 years ago.
    For some of these drugs, no substitutes are available. Or, 
if they are, they're less effective and may involve greater 
risks of adverse side effects. The chance of medical errors 
also rises as providers are forced to use second- or third-tier 
drugs that they're less familiar with.
    A survey conducted by the American Hospital Association 
showed that nearly 100 percent of their hospitals experienced a 
shortage. Another survey, conducted by Premier Health System, 
showed that 89 percent of its hospitals and pharmacists 
experienced shortages that may have caused a medication safety 
issue or error in patient care.
    It is clear that there are a large number of overlapping 
factors that are resulting in unprecedented shortages. Experts 
cite a number of factors that are responsible for the 
shortages. These include market consolidation and poor business 
incentives, manufacturing problems and production delays, 
unexpected increases in demand for a drug, inability to procure 
raw materials, and even the influence of the ``gray market''.
    However, when drugs are made by only a few companies, a 
decision by any one drugmaker can have a large impact.
    Therefore, to help correct a poor market environment or to 
prevent ``gray market'' drugs from contaminating our medication 
supply chain, we must address the drug shortage problem at its 
root.
    As I mentioned, the bill I introduced with Senator Casey 
will require manufacturers to provide early notification to 
FDA. But it will also direct the FDA to provide up-to-date 
public notification of any actual shortage situation and the 
actions the agency would take to address them.
    Additionally, the bill requires the FDA to develop an 
evidence-based list of drugs vulnerable to shortages and to 
work with the manufacturers to come up with a continuity of 
operations plan to address potential problems and add 
redundancies to protect against potential shortages.
    The bill would also direct the FDA to establish an 
expedited reinspection process for manufacturers of a product 
in shortage.
    With manufacturers providing early notification, the FDA's 
Drug Shortage Team can then appropriately use their tools to 
prevent shortages from happening. In the last 2 years, the FDA, 
with early notification and more information, has successfully 
prevented 137 drug shortages.
    And while the Executive order the President issued in 
October took steps toward advancing these goals, he has made 
clear that Congress must act in order to protect patients and 
ensure consumers have access to the life-saving medications 
that they need and deserve.
    I understand that this may be a short-term solution to a 
long-term problem. That's why I have been working with several 
of my colleagues on this committee to come up with a broad, 
permanent solution--one that includes methods to address the 
root causes of drug shortages.
    At the urging of this bipartisan working group, the FDA 
held a public workshop in September that brought together 
patient advocates, industry, consumer groups, health care 
professionals, and researchers to discuss the causes and impact 
of drug shortages and possible strategies for preventing or 
mitigating future shortages.
    In addition to the workshop, I have been speaking with a 
broad range of stakeholders to try to discover why we have seen 
such a large number of shortages over the past few years.
     I have also urged FDA to improve their communication with 
patients and providers. This will ensure that patients and 
doctors are not the last to know when there is a shortage.
    This current explosion of shortages appears to be a 
consequence of a lack of supply of certain products to keep up 
with a substantial expansion in the scope and demand for those 
products.
    Due to the complex nature of these drug shortages, there is 
no single or simple solution that will solve all problems. A 
solution will require all stakeholders to play a role in 
mitigating future drug shortages.
    That includes increased and transparent coordination 
between the offices in the FDA responsible for drug shortages, 
compliance, and new drug applications.
    That includes better recordkeeping and communication 
between the drug manufacturers and the FDA.
    And it must include methods to ensure that we have the 
manufacturing capabilities to keep up with demand. One solution 
may be to provide tax credits to incentivize manufacturers to 
upgrade their production capabilities or to remain in or join 
the market.
    But one thing is clear: This is a national public health 
crisis that must be addressed. I will continue to work with my 
colleagues in the committee and in the Senate to try to develop 
a broad and permanent solution and urge my colleagues to 
support this legislation that will help ensure access of needed 
medications for our Nation's patients.
    Thank you.

    The Chairman. Senator Klobuchar, thank you very much for 
your statement and your leadership on this issue.
    I know you have other committee business that you have to 
attend to, so thank you very much for being here, and we look 
forward to working with you as we try to resolve this issue.
    Senator Klobuchar. Thank you.
    The Chairman. Thanks, Senator Klobuchar.
    I thought I would call the first panel up, and that would 
be Dr. Sherry Glied, Dr. Sandra Kweder, and that's it, those 
two up for our first panel.
    Before I do that, we have usually a rule in this committee 
that we don't have opening statements and stuff, but I know 
this is an issue that a lot of people have weighed in on and 
have great concerns about, and I thought I would allow 
Senators, if they would like, to make short comments on this 
before we turn to our panel.
    [Pause.]
    So, I would yield. The order of appearance is Senator Kirk, 
Senator Franken, Senator Merkley, Senator Isakson, and Senator 
Bennet.
    If you had a short comment, I'd be more than willing to 
entertain comments, Senator Kirk.

                       Statement of Senator Kirk

    Senator Kirk. Thank you. I very much appreciate this 
hearing. An ex-staffer of mine was just diagnosed with lymphoma 
type B. As everyone knows who fights that, you take a four-drug 
regimen called R-CHOP, and that includes doxorubicin, which is 
generic, only three suppliers, and in short supply. And so I'm 
very much looking forward to this hearing. I applaud Senator 
Klobuchar's legislation.
    We want to make sure that the very large FDA bureaucracy 
does not generate a decision, because of manufacturing 
regulations or others, that issues a completely unbalanced 
decision to shut down supply, so that the patient that I know 
so well does not have doxorubicin to fight lymphoma.
    And so I applaud you, and I think this is a very important 
hearing and hope to back legislation on this. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator Kirk. Thanks for your 
leadership on this.
    Senator Franken, I want to thank you also for your 
leadership on this issue. You've been heavily involved in this, 
and I appreciate it. Any comments?

                      Statement of Senator Franken

    Senator Franken. Thank you, Mr. Chairman. I'm glad to have 
the opportunity to discuss this critical problem, and I want to 
thank my senior Senator, Senator Klobuchar, for her leadership 
on this.
    As you know, prescription drug shortages are affecting the 
care that patients in Minnesota and across the Nation receive, 
and in some cases it is truly a matter of life and death, as 
Senator Kirk so personally discussed.
    I recently talked to a doctor from Minnesota who told me 
that a chemotherapy that she uses with her patients is 
currently in shortage. For new patients, she's going to have to 
recommend a treatment that may not be as effective, and for 
patients currently on the chemo, she's going to have to switch 
them to a different treatment. She told me that when she has to 
change a patient from a chemo that is working to a new 
treatment, the new chemo has only a 1 in 3 chance of working 
the first time, 1 in 3. Imagine telling that to your patient. 
Imagine being the patient.
    As I'm sure we'll hear from the expert witnesses, this 
issue is not simple. There is no one cause or one solution. I 
am proud to participate in a bipartisan working group of 
members of this committee that is looking at legislative 
proposals to address these critical shortages, and I am a co-
sponsor of the legislation introduced by Senators Klobuchar and 
Casey that will require drug manufacturers to let the FDA know 
when they may discontinue a drug. This legislation is an 
important first step while we work toward ways to address this 
issue on a larger scale.
    Mr. Chairman, thank you again for holding this important 
hearing. I look forward to hearing the expert testimony today 
and to continue to work with you to preserve access to life-
saving drugs in Minnesota and across our Nation. Thank you.
    The Chairman. Thank you, Senator Franken.
    Senator Merkley.

                      Statement of Senator Merkley

    Senator Merkley. Thank you, Mr. Chairman. Thank you for 
sponsoring this hearing. I applaud Senator Klobuchar and 
Senator Casey for helping highlight this issue, put a spotlight 
on it. It's certainly of extreme concern in the health care 
system throughout the country.
    In November I held a roundtable discussion at the Oregon 
Health and Sciences University to hear from Oregonians who have 
been directly impacted. I heard from a patient who was 6 months 
into his treatment for multiple myeloma when he was suddenly 
told that the drugs were no longer available. And at first it 
was you can't come in this day of the week, come in 2 days 
later; and then it was they're not available at all. And this 
is happening thousands of times a week across this Nation.
    Suddenly you have a patient in the middle of a drug 
regimen. The spouse is wondering what can I do to help acquire 
these medicines. Do I get on the Internet? Do I call hospitals 
throughout this country? The patient, who should be focusing 
all of their mental energy on healing, is suddenly 
extraordinarily stressed, the worst possible situation for 
actually healing and taking advantage of the regimen.
    It isn't just that it's stressful. It's that it possibly 
destroys the effectiveness of the treatment regimen both 
because of the unavailability and because of the stress.
    And certainly doctors and pharmacists express that getting 
access to drugs that are in shortage takes up an extraordinary 
amount of their time and energy, which is hugely inefficient 
for the system. They also talked about how, over the last 
couple of years, the situation has gotten so much worse that 
there have been changes, and that's what this hearing is about, 
understanding it better, because it's absolutely counter-
productive and unacceptable.
    I look forward to hearing from the experts and working with 
my colleagues on both sides of the aisle who expressed a lot of 
concern about this. Thank you.
    The Chairman. Thank you, Senator.
    Senator Isakson.

                      Statement of Senator Isakson

    Senator Isakson. I commend you on calling the hearing. This 
is a preeminent issue in my State of Georgia.
    The Chairman. Thank you, Senator Isakson.
    Senator Bennet.

                      Statement of Senator Bennet

    Senator Bennet. Thank you, Mr. Chairman and the Ranking 
Member. Thanks for holding this hearing. It's actually been 
great to hear the comments from my colleagues up here because 
we are seeing exactly the same thing in Colorado. You know, the 
FDA has been notified about 220 drug shortages this year, and 
we know that the number of patients this affects is monumental. 
For cancer alone, over 550,000 patients are currently affected 
by our national drug shortage crisis.
    In Colorado, I can tell you that our patients and providers 
are extremely frustrated. A pharmacist at St. Mary's Hospital 
in Grand Junction told us that he keeps a 2-page list of 50 
drugs that he can't get or barely can get hold of, including 12 
chemotherapy drugs. Our own Colorado Cancer Research Program 
has held public forums in places like Denver and Colorado 
Springs with hundreds in attendance, trying to mobilize 
advocates and find consensus around solutions.
    Like everyone else on this panel, I have gotten letters and 
calls from people suffering from cancer in my State saying what 
are you doing about these drug shortages? The last thing that 
people who are suffering from cancer should be doing is 
spending time having to call their Senators to say how do I get 
my drugs.
    Mr. Chairman, this is a vital issue, a critical problem in 
all of our States, and I think we need to come together in the 
HELP Committee in a bipartisan way and make sure we're 
addressing it. We will continue to provide you and the Ranking 
Member with the work that's being done in Colorado in the Drug 
Shortage Working Group with additional ideas for consideration. 
I look forward to the testimony today.
    Thank you, Mr. Chairman, for holding what I consider one of 
the most important hearings we've had since I've been here.
    The Chairman. Thank you, Senator Bennet.
    Senator Bingaman, any statements or any comments?

                     Statement of Senator Bingaman

    Senator Bingaman. Mr. Chairman, I will not have comments. I 
look forward to the hearing and congratulate you for calling 
the hearing.
    The Chairman. Thank you very much.
    Senator Blumenthal.

                    Statement of Senator Blumenthal

    Senator Blumenthal. I also look forward to the hearing and 
want to thank the Chairman for having it. It is a subject that 
certainly impacts Connecticut, where the workhorse medicines--
and that is a term that the docs have used in describing them 
to me--are chronically in short supply. Our hospitals are 
scrambling to meet the needs of patients.
    I have read the testimony that we are going to be presented 
today, and I have to say right at the outset that I think that 
much more drastic and far-reaching and aggressive measures are 
necessary than have been proposed in any of the testimony, any 
of the GAO report that has been submitted so far.
    We have a working group here that has been laboring on this 
issue, but I am determined that at least I will be proposing 
more aggressive measures that are necessary to crack down on 
what appear to be anti-consumer practices.
    This market is simply not working. It cannot be allowed to 
continue in the dysfunctional fashion that it is right now. It 
is in many respects similar to the kind of monopolistic or 
oligarchic markets that we've seen in other areas where 
essential products are, in effect, manipulated according to 
price and supply, and these are essential products.
    The shortages are creating a public health menace, and the 
anti-consumer practices clearly promote a gray market, so-
called gray market that drastically inflates prices and 
contributes to the shortages. We ought to have zero tolerance 
for this kind of profiteering and price gouging, and we ought 
to do whatever is necessary to assure supplies, adequate 
supplies of these drugs. Whether it's oncology or 
anesthesiology, these drugs are needed and they should be 
provided, and stronger governmental action seems to be 
absolutely necessary.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Blumenthal.
    Senator Whitehouse.

                    Statement of Senator Whitehouse

    Senator Whitehouse. Mr. Chairman, thank you. I just wanted 
to add to the record of these proceedings that in Rhode Island, 
we're getting reports that it tends to be vulnerable 
populations that are going without or facing the risk of not 
having the prescription drugs that they need.
    We've heard from the medical society that pediatricians are 
feeling a particular pinch, and one particular Rhode Island 
institution that we are very proud of is Women and Infants 
Hospital, which is really renowned throughout the region. We 
have people fly in from other States and countries to take 
advantage of the highly specialized care available there. It is 
a world-class facility, and they are facing drug shortages in 
chemotherapy, in anesthesia, and in things as simple as parent-
child nutrition, potassium and magnesium, things like that.
    There's a drug called doxil that is in such short supply 
that Women and Infants now has a waiting list for new cancer 
patients that require that drug, and to meet their existing 
need they've had to go into the gray market that Senator 
Blumenthal referred to, which is way above market price and is 
a market in which people believe a certain amount of hoarding 
and gaming for price gouging purposes is taking place.
    This is hitting home in Rhode Island, and so I'm very 
grateful to you, Mr. Chairman, for holding this hearing. Thank 
you.
    The Chairman. Thank you, Senator Whitehouse.
    I thank all the Senators. This is such an important issue, 
I just thought it worthwhile for every Senator to express 
himself on this issue before we get to our panels, and so I 
appreciate that very much.
    We'll call our first panel. Dr. Glied and Dr. Kweder, 
please come to the table. I have Dr. Glied on this side and Dr. 
Kweder on that side.
    Our first witness is Dr. Sherry Glied, the Assistant 
Secretary for Planning and Evaluation with U.S. Department of 
Health and Human Services. Dr. Glied provides guidance and 
economic analysis to the Department on Health Policy. In 
October her office issued a report entitled Economic Analysis 
of the Cause of Drug Shortages.
    She has previously served as a senior economist for health 
care policy on the President's Council of Economic Advisors 
under Presidents Bush and Clinton.
    Dr. Glied, we thank you for being here today.
    Next we have Dr. Sandra Kweder, Deputy Director of the 
Office of New Drugs in the Center for Drug Evaluation and 
Research in the Food and Drug Administration. As you can tell 
by her uniform, Dr. Kweder is a career public health officer 
who works on a daily basis at FDA to ensure that drugs we use 
in this country are safe and effective for their intended uses. 
Her duties also include supervising FDA's Office of Drug 
Shortages.
    We have two people who are quite knowledgeable about this 
issue, and we appreciate your being here.
    We'll start with you, Dr. Glied.
    I'll just say, both of your statements will be made a part 
of the record in their entirety. If you could sum up in 5, 6, 7 
minutes, we'd appreciate it. Then we can get into a discussion.
    Dr. Glied, please proceed.

   STATEMENT OF SHERRY GLIED, Ph.D., ASSISTANT SECRETARY FOR 
    PLANNING AND EVALUATION, DEPARTMENT OF HEALTH AND HUMAN 
                    SERVICES, WASHINGTON, DC

    Ms. Glied. Thank you, Mr. Chairman, members of the 
committee. I'm honored to be here today to discuss the work 
we've been doing at ASPE on the economics of this terrible 
problem of drug shortages, and I'm going to confine my remarks 
today to just two points.
    First, why are there shortages in the market for some 
medically necessary drugs when shortages are not a feature of 
the U.S. economy in general? We don't usually see those in 
other markets.
    Shortages of most products in most markets lead prices to 
rise, and those increases in price cause consumers to buy less 
of a product, and they lead producers to manufacture more of 
it. That process does not happen in these markets.
    The problem is not the prices. Our analyses show that the 
prices of drugs in these markets do rise in response to 
shortages in just the same way they do in other markets. But 
these short-run price increases have very little impact on 
either the demand for these products or on their supply.
    On the demand side, by definition, these drugs are 
medically necessary, so treatment patterns don't change very 
much even when prices rise, and that's what we would like to 
see.
    On the supply side, the kinds of drugs that we now see in 
shortage are produced using costly, very specialized equipment. 
Building a new production line and increasing capacity in this 
market takes several years and can cost hundreds of millions of 
dollars. In the short run, manufacturers can and do respond to 
price increases by switching among the approved product within 
a class using the same production line or factory. So if you 
think about these production lines, they can produce many 
different drugs within a class, and the manufacturers can 
switch among them.
    Unfortunately, switching among products often just shifts 
the shortage from one drug in a class to another drug in the 
same class.
    Manufacturers can also respond to price increases by 
increasing the level of capacity utilization in their plants, 
moving from, say, two shifts a day to three. But we've learned 
that most manufacturers in this sector today are operating at 
full capacity, essentially 24/7, and operating 24/7 can limit 
their ability to keep their plants in good working order and 
may be contributing to the quality problems that we're seeing 
in this sector.
    Now, in the longer run, manufacturers can expand capacity 
if they see a profitable market ahead of them. In our analyses, 
we found that the market for sterile injectable generic drugs, 
cancer drugs in particular, is robust and is growing. Over the 
last 5 years, the size of the overall generic sterile 
injectable market expanded by over 50 percent, and they 
anticipate to grow even further. And manufacturers are 
responding to this anticipated growth. Several have told us 
that they are investing substantially to upgrade existing 
facilities and to build new facilities to serve this growing 
market. Those facilities are not likely to be online for the 
next year to 3 years, however.
    The second point I wanted to touch on is the source of the 
prices in this market. Unlike the situation with most drugs in 
the United States, sterile injectable drugs are not purchased 
directly by patients, and they are not reimbursed directly by 
insurance. Rather, these drugs are purchased by health care 
providers, by doctors and hospitals, who are paid for the 
delivery of the service that includes the drug, and they are 
sometimes also paid a separate fee to compensate for the cost 
of procuring the drug. They obtain the drugs, in turn, through 
group purchasing organizations, which negotiate prices with 
manufacturers on behalf of their clients.
    Group purchasing organizations compete among themselves to 
negotiate the lowest possible price at which they can get an 
adequate supply of drugs from manufacturers. That single 
negotiated price applies to the hospital or physician's 
purchases of that drug regardless of the insurance held by the 
patient who ultimately uses the drug.
    As we think about strategies to address this problem of 
shortages, it's important to keep in mind these two points, 
first, that supply across the sector does not increase in the 
short run in response to price increases, and that there is a 
very sharp disconnect between the fees paid to providers and 
the amount that group purchasing organizations pay to 
manufacturers.
    In summary, our analyses suggest that the current shortages 
will likely be fully resolved only when new supply sources come 
online. In the meantime, managing shortages effectively in the 
short run, as the FDA's Drug Shortage Program is doing, is 
likely to be the best approach to addressing this serious 
public health problem.
    Thank you. I'd be happy to take any further questions.
    [The prepared statement of Ms. Glied follows:]
               Prepared Statement of Sherry Glied, Ph.D.
                              introduction
    Mr. Chairman and members of the committee, I am Dr. Sherry Glied, 
Assistant Secretary for Planning and Evaluation at the U.S. Department 
of Health and Human Services. I am honored to be here today to discuss 
the economics of drug shortages.
    For some patients, a change in treatment regimen because an 
important medication is not available can seriously reduce the quality 
of care they receive and threaten their ability to get better. We have 
heard the stories of a number of people who have faced this problem. 
Patients, like Jay Cuetara, a cancer patient from California with whom 
I met earlier this fall, are the ones who suffer when the center where 
they receive chemotherapy runs out of the drugs used to treat their 
cancer.
    The Food and Drug Administration (FDA) has successfully prevented 
233 drug shortages since the beginning of 2010 and is taking additional 
actions to address drug shortages in response to the President's 
October 31 Executive order. In the 4 weeks following the issuance of 
the Executive order, FDA has received 61 notifications, a sixfold 
increase over the average notifications per month in the previous 10 
months.
    Drug shortages have been increasing in frequency and severity in 
recent years and are adversely affecting patient care. A small number 
of drugs in the U.S. experience a shortage in any given year, but the 
number of reported prescription drug shortages in the United States has 
nearly tripled between 2005 and 2010, increasing from 61 to 178. In 
2011, FDA has continued to see an increasing number of shortages, 
particularly among older sterile injectable drugs, including cancer 
drugs, anesthetics for surgery, drugs for emergency medicine, and 
electrolytes for intravenous feeding. There are many causes to this 
challenging problem and addressing this significant public health 
threat requires the urgent attention of industry, other stakeholders, 
and government.
                               background
Market Behavior
    Firms have been increasing their levels of manufacturing capacity 
utilization to accommodate the increase in the volume of chemotherapy 
drugs administered and the expansion of products available for generic 
manufacturing because of patent expiration. Shortages have been 
concentrated in drugs where the volume of sales was declining in the 
years preceding the shortage, suggesting that manufacturers are 
diverting capacity from shrinking lines of business to growing ones. 
Quality problems, potentially caused by the high level of capacity 
utilization, have led some plants to shut down. A recent report by FDA 
found that quality problems at drug manufacturing facilities resulting 
in disruptions in supply were the leading cause of drug shortages, 
accounting for 43 percent of all shortages. Firms have not responded 
quickly to changes in demand and prices in the sterile injectable drug 
industry by building new plant capacity because of the high fixed costs 
of specialized production. Furthermore, because shortages are generally 
uncommon and occur in drugs for which capacity is highly specialized, 
and because there are few penalties for failing to supply contracted 
drugs, there is no financial return to manufacturers from investing in 
excess capacity--that is, capacity that is not used outside a supply 
shortage, and thus earns no revenue except during a supply shortage.
    Generic drug manufacturers must make strategic decisions about how 
to deploy existing production capacity among products, based on their 
expectations about what choices their competitors will make and what 
demand will be. In general, manufacturers will prefer to concentrate on 
markets with fewer competitors, where they are likely to face less 
price competition. Conversely, purchasers, such as GPOs, will prefer 
that multiple competitors produce each product. If manufacturers 
misjudge their competitors' choices, there may be excess supply and 
depressed prices for some drugs and insufficient supply and shortages 
of others. In small markets, such as those for sterile injectable 
drugs, these decisions can lead to considerable volatility in the 
market.
        why do shortages occur in the prescription drug market?
    The prescription drug and vaccine market is characterized by 
sporadic shortages of individual drugs and occasional periods during 
which many drugs in a class are in shortage. Although product shortages 
usually lead prices to rise, consumers to buy less, and producers to 
manufacture more, that process does not happen in the markets for some 
medically necessary drugs, especially sterile injectable drugs. By and 
large, neither the supply nor the demand for medically necessary drugs 
responds quickly when the prices of these drugs rise.
    By definition, these drugs are medically necessary, so they have 
few substitutes and patients cannot generally shift their use over 
time. Unlike consumers of other goods and services, patients, 
hospitals, and physicians generally do not change treatment patterns 
when prices rise.
    Suppliers are also quite insensitive to changes in price, 
particularly in the short-run. The kinds of medicines that are in 
shortage are produced using costly, specialized equipment and require 
complex production processes that must meet Current Good Manufacturing 
Practice guidelines. Manufacturers can and usually do substitute 
products within a class using the same production line, but in most 
cases, each individual drug requires regulatory approvals, including 
manufacturing controls, which are limited to that particular drug. It 
generally takes a long time--years in some cases--for the industry to 
increase capacity in response to an increase in prices. If the increase 
in prices is expected to be temporary (as would be expected in the case 
of a shortage due to a production line disruption), investments in 
increased capacity are unlikely to occur. In the longer run--over a 
period of 2-3 years, for example--supply will be much more responsive 
to price.
    This low level of price responsiveness on both the demand and 
supply sides of the market for many medically necessary products means 
that any changes from historical patterns in supply or demand can lead 
to shortages of these drugs.
     the case of sterile injectable cancer drugs: supply and demand
    In most cases, sterile injectable drugs are not purchased directly 
by patients or reimbursed directly by insurance. Rather, these drugs 
are purchased by health care providers (generally hospitals and 
physicians). Providers are paid for the delivery of the service that 
includes the drug. Public and private insurers also pay a separate fee 
to compensate for the cost of the drug. Under the Medicare program, the 
separate fees for sterile injectable drugs generally are paid under 
Part B.
    Most hospitals and physicians do not purchase sterile injectable 
drugs directly from the manufacturer. Rather, these drugs are purchased 
through group purchasing organizations (GPOs), which negotiate prices 
with manufacturers on behalf of their clients. GPOs do not take 
physical possession of the drugs. Instead, a wholesaler takes 
possession of the drug and then sells the drugs to hospitals and 
physicians at the GPO negotiated price.
    While GPOs negotiate the lowest prices they can with manufacturers, 
based on anticipated volume of sales, their clients are not compelled 
to purchase drugs from a contracted manufacturer, so the GPO contracts 
do not necessarily contain minimum quantity guarantees. GPO contracts 
are generally in place for years and typically include price adjustment 
clauses. If a GPO is offered a lower price by a competing manufacturer, 
the original contracted manufacturer has a right of first refusal to 
match the new price. GPO contracts also typically include failure-to-
supply clauses. These clauses generally require the manufacturer to 
reimburse the GPO for the difference between the negotiated price and 
the purchased price when providers must buy the drug from another 
source. These failure-to-supply clauses, however, provide no 
reimbursement if there are no alternative sources for the drug, do not 
reimburse for resources expended looking for other sources, and are of 
limited duration.
    Manufacture of generic sterile injectable drugs is a concentrated 
market with 7 manufacturers making up a large percentage of the market. 
Most of the production of a given drug is by three or fewer 
manufacturers. Analysis of a sample of 33 generic sterile injectable 
cancer drugs shows that for 28 of these drugs, at least 90 percent of 
unit sales in 2010 were made by three or fewer manufacturers.\1\ These 
manufacturers typically each operate a small number of facilities at 
which injectable drugs can be produced. These facilities, in turn, each 
contain several manufacturing lines. A particular drug can be produced 
on one or more of these lines in runs that may last from hours to 
weeks. The same line may be used for multiple different drugs produced 
in separate batches; however, certain drugs (including cytotoxic drugs) 
may only be produced on certain types of lines and in certain types of 
facilities, so the extent of substitution is limited.
---------------------------------------------------------------------------
    \1\ National Cancer Institute analysis of IMS National Sales 
Perspectives. In Economic Analysis of the Causes of Drug Shortages, 
U.S. Department of Health and Human Services, Office of the Assistant 
Secretary for Planning and Evaluation, October 2011, footnote 10.
---------------------------------------------------------------------------
    It is important to note that the low price responsiveness of demand 
for sterile injectable drugs also has implications for inventories and 
capacity decisions. If there is an excess supply of a particular drug, 
there may be no market for it, even at a low price. The combination of 
limited ability to compel supply (through failure-to-supply clauses or 
contractual breach provisions) and low price responsiveness means that 
manufacturers face an asymmetry of incentives: there is little cost 
(except reputational) of producing too little of one drug (rather than 
another), but a potentially high cost of producing too much of that 
drug.
    ASPE recently released a report on drug shortages that focused on 
sterile injectable cancer drugs, one of the classes of drugs where 
there are many shortages.\2\ The market for sterile injectable cancer 
drugs is robust and growing. FDA analysis of IMS data shows that the 
number of vials of sterile injectable cancer drugs shipped between 2006 
and 2010 increased by 14 percent, in part because of the aging of the 
population. Similarly, ASPE analysis of Medicare Part B data shows that 
between 2006 and 2011, the volume of services for sterile injectable 
cancer drugs increased by about 20 percent.
---------------------------------------------------------------------------
    \2\ U.S. Department of Health and Human Services, Office of the 
Assistant Secretary for Planning and Evaluation, Economic Analysis of 
the Causes of Drug Shortages, October 2011. http://aspe.hhs.gov/sp/
reports/2011/drugshortages/ib.shtml.
---------------------------------------------------------------------------
    That increase in volume, however, did not occur across all sterile 
injectable cancer drugs. Using Part B data, ASPE compared the volume of 
services prior to shortages for sterile injectable cancer drugs that 
did and did not experience a shortage. On average, drugs that 
subsequently experienced a shortage are those in which the volume of 
sales was declining in the 2006-8 period prior to the shortages. Drugs 
that have not experienced a shortage since 2008 had an average 11 
percent increase in volumes of services over this period, and a similar 
increase in the 2008-11 period that followed. The results suggest that 
manufacturers with limited capacity may be making strategic decisions 
about which drugs to produce when faced with falling demand for 
particular drugs.
    the case of sterile injectable cancer drugs: changes in market 
                   structure and production capacity
    Manufacturers can increase their portfolio of generic sterile 
injectable drugs by filing an abbreviated new drug application (ANDA) 
with the FDA, which must be approved before the manufacturer can market 
the generic drug. More ANDA approvals mean that manufacturers have more 
drugs to choose to manufacture with their existing capacity and 
therefore, manufacturers may substitute newer drugs for other drugs. 
Alternatively, they may increase the rate at which they make use of 
their existing manufacturing capacity. There was a substantial increase 
in the number of new injectable ANDA approvals beginning in 2008 (prior 
to the increase in sterile injectable drug shortages).
    While the overall market for sterile injectable cancer drugs 
increased by 14 percent between 2006 and 2010, the number of vials sold 
by generic drug manufacturers increased much more rapidly--by nearly 30 
percent. Over this period, the overall generic sterile injectable drug 
market (including cancer drugs and other classes of products) expanded 
by 52 percent. Some of this expansion was accompanied by reductions in 
brand manufacturers' production of these drugs.
    Our analysis showed that generic manufacturers have expanded not 
only the volume of product they produce but also the range. In every 
year between 2006 and 2010, the number of new combinations in the 
market (a manufacturer producing a drug that it had not previously 
produced) exceeded the number of exits.
    Expansion of the scope of production is also evident in the 
decisions of leading manufacturers to increase future manufacturing 
capacity. Several leading manufacturers of generic sterile injectable 
drugs indicated that they are upgrading existing facilities or building 
new facilities to serve this market. According to news reports and 
discussions with manufacturers, Hospira is investing $65 million in 
capital improvements in sterile injectable drug manufacturing sites, 
Teva is opening a new manufacturing site, and Ben Venue is opening a 
new, expanded facility to replace an older manufacturing facility.\3\ 
These investments will increase capacity in both older and newer 
generic sterile injectable drugs.
---------------------------------------------------------------------------
    \3\ News reports and personal communication with manufacturers. In 
Economic Analysis of the Causes of Drug Shortages, U.S. Department of 
Health and Human Services, Office of the Assistant Secretary for 
Planning and Evaluation, October 2011, footnotes 16-17.
---------------------------------------------------------------------------
    Unfortunately, this new capacity is unlikely to come online for at 
least another 18 months. Meanwhile, when there is little excess 
manufacturing capacity, producing a new drug will often require 
manufacturers to reduce or stop production of another drug or to 
operate at a much higher than normal level of capacity utilization.
    Increasing utilization of capacity is a good way of expanding 
supply in the short-run, but poses risks. High rates of capacity 
utilization may also limit the ability of manufacturers to perform 
routine maintenance and keep facilities in good order.\4\ A recent 
report by FDA found that quality problems at drug manufacturing 
facilities resulting in disruptions in supply were the leading cause of 
drug shortages, accounting for 43 percent of all shortages.\5\
---------------------------------------------------------------------------
    \4\ Donald Gross, John F. Shortle, James M. Thompson, and Carl M. 
Harris, Fundamentals of Queuing Theory, Fourth Edition, John Wiley & 
Sons, Inc., Hoboken, NJ, 2008.
    \5\ U.S. Food and Drug Administration, A Review of FDA's Approach 
to Medical Product Shortages, October 2011. http://www.fda.gov/
AboutFDA/ReportsManualsForms/Reports/ucm2750
51.htm.
---------------------------------------------------------------------------
Supply Disruptions
    The structure of the sterile injectable market, the recent 
expansion in volume and scope, and the consequent very high level of 
capacity utilization, mean that small disruptions to supply--such as 
may occur because of quality problems--which would otherwise be 
absorbed through diversion of capacity, can lead to cascading and 
persistent shortages.
    Over time, entry and expansions in capacity in the industry, should 
lead to a situation where shortages due to supply disruptions are 
sporadic and rare. In the current environment, where capacity is 
severely constrained, shortages induced by disruptions can cascade 
throughout the sector and persist for long periods of time.
                            recommendations
    The Administration is doing everything in its power to address the 
shortages administratively. There a few areas where additional 
authority or action by Congress may be needed or where the private 
sector can take steps. Based on our examination of the underlying 
factors that lead to periods of shortage in the prescription drug 
market, and particularly the underlying market factors that have 
contributed to the current shortages in the area of sterile injectable 
drugs, we offer a few recommendations.
    Policymakers must balance the short-run benefits of tailoring 
regulatory responses to specific situations against the risk of 
strategic behavior and consequent reductions in competition in the long 
run.
    Steps that both expedite expansion of supply and maintain product 
quality in sectors with high capacity utilization could reduce the risk 
of shortages not only in the current situation, but in the future as 
well. To facilitate this, FDA can expedite review of new manufacturing 
capacity in this area, and we understand that FDA is already doing this 
and committed to continuing to do so.
    Private organizations that purchase drugs (including GPOs), can 
help to alleviate future shortages by negotiating with drug 
manufacturers to strengthen the failure-to-supply requirements in their 
contracts. Such contractual changes are likely to incentivize drug 
manufacturers to invest in extra capacity of both production lines and 
active pharmaceutical ingredients.
    As part of the Administration's broader effort to work with 
manufacturers, health care providers, and other stakeholders to prevent 
drug shortages, the President has directed the FDA to take steps that 
will help to prevent and reduce current and future disruptions in the 
supply of lifesaving medicines and FDA is responding to this directive.
    The Administration also announced on October 31, 2011, its support 
for bipartisan legislation (S. 296 and H.R. 2245) that would require 
all prescription drug shortages to be reported to FDA and would give 
FDA new authority to enforce these requirements.
                                summary
    In summary, the current class-wide shortages in the sterile 
injectable drug industry appear to be a consequence of a substantial 
expansion in the scope and volume of products produced by the industry 
that has occurred over a short period of time, without a corresponding 
expansion in manufacturing capacity. The current shortages will likely 
be resolved when new supply sources come online as the manufacturing 
industry increases its capacity. In the meantime, the FDA's Drug 
Shortage Program is working diligently with manufacturers and other 
stakeholders to mitigate the effects of the shortages and the 
Administration is doing everything in its power to address shortages 
administratively.
    I appreciate the opportunity to speak with you about our analysis 
of drug shortages. I would be happy to respond to any questions.

    The Chairman. Dr. Glied, thank you very much.
    Dr. Kweder.

 STATEMENT OF SANDRA KWEDER, M.D., DEPUTY DIRECTOR, OFFICE OF 
                 NEW DRUGS, FDA, WASHINGTON, DC

    Dr. Kweder. Good morning, Mr. Chairman and members of the 
committee. Thank you, thank you, thank you for holding this 
hearing. I am Dr. Sandra Kweder, as introduced. I'm the Deputy 
Director in the Office of New Drugs in FDA.
    This problem of drug shortages is a very serious problem 
for patients, and it's a serious problem for medical care 
providers in this country, and I think it touches every one of 
us or our families in some way.
    My colleagues and I, at FDA, take this problem very 
seriously, and we look forward to continuing to work with you 
and our other colleagues in the profession to find short- and 
long-term solutions.
    Today I want to highlight FDA's ongoing actions to prevent 
and mitigate shortages, as well as mention some more recent 
efforts by the Administration to address this problem.
    You already stated that the number of drug shortages has 
been rising steadily over the past 5 years, to a level that we 
would never have anticipated. In 2005, we reported a total of 
61 actual drug shortages for that year. By 2010, the number was 
178 in that year. That rising trend has continued into 2011. 
Between January and October of this year, we were tracking 220 
actual shortages. That doesn't include the ones that we 
prevented.
    In July of this year, Dr. Howard Koh, the Assistant 
Secretary of Health at HHS, started to convene a series of 
meetings with representatives from across the Department, 
including us and Dr. Glied, to try and understand more about 
the roots of drug shortages and what we could do with our 
existing authorities to decrease their frequency.
    In September, we at FDA held a public meeting to try and 
gain additional insights into the causes and impacts of drug 
shortages, and some possible strategies for preventing or 
mitigating them. We were open to any ideas that we hadn't 
already thought of. The insights that we gained from that 
meeting on the effects of this problem on patient care and 
patients were staggering.
    On October 31 of this year, the Administration took a 
series of steps to reduce drug shortages, including issuance of 
an Executive order by the President, an announcement of support 
for bipartisan legislation, and FDA directly communicating with 
manufacturers to encourage them to voluntarily continue to 
report any problems that they were having that might ultimately 
result in a drug shortage.
    That Executive order had three main components. One was 
directing FDA to use all appropriate administrative tools to 
require manufacturers to provide us advance notice of 
shortages. It directed us to continue to expand our efforts to 
expedite our work in reviewing manufacturing applications and 
conducting inspections where needed, and to work with the 
Department of Justice to examine whether secondary wholesalers 
or other market participants were responding inappropriately or 
illegally by creating a gray market with price gouging.
    In parallel, a number of things occurred. HHS released two 
reports, one by Dr. Glied and her colleague, and one by FDA to 
report on our views on the current status of medical product 
shortages and the agency's role in monitoring, preventing, and 
mitigating them. That same day, we in FDA sent a letter to 
every single pharmaceutical manufacturer reminding them of what 
their legal obligations were to report to us under very narrow 
circumstances about discontinuing product production, but also 
urging them to notify us early when they had any problem that 
might result in a drug shortage.
    Since that time, we at FDA have been continuing to tackle 
the problem of drug shortages head on. There is no question 
that we have our work cut out for us, but this is a public 
health crisis, and we're responding. We have always had strong 
internal working relationships in the agency on these matters, 
and we are continuing to expand our efforts to communicate with 
the industry in this work.
    Since October 31, there has been a significant increase in 
notifications about the number of potential shortages to us. 
Our efforts are having an effect. We used to get about 10 
notifications a month of a potential shortage. Since October 
31, we have had 61 notifications, a sixfold increase. They 
continue to identify areas where we can help, and we have 
helped in many of those cases. But they also continue to show 
us serious quality-related problems that firms are having in 
production of quality drug products.
    Nonetheless, as a result of these reports, we've intervened 
to prevent 96 drug shortages. Now, in one intervention alone, 
we prevented 86 shortages at a single plant. We're working to 
resolve quality problems with firms and review and expedite 
applications that they have in place that would mitigate any 
potential shortage. We have doubled the number of our staff in 
the drug shortage program. We have drafted guidance for 
industry on what exactly we think is helpful for them to report 
and under what circumstances, and just today we've published an 
interim final rule that clarifies and expands some of the 
definitions within our legal authority to require reporting for 
product disruptions where a company is the sole source provider 
of an important drug.
    Since October 31, we've been engaging in a series of 
meetings with stakeholders, including individual companies, 
industry organizations, medical care providers, Pharma and bio 
and other organizations who are interested in finding solutions 
to this problem. One of our most important goals we have for 
these meetings is finding ways to facilitate industry 
commitment and performance in producing high-quality products.
    On a separate track, I want to mention something critical. 
Many characterize FDA's activities in this area in working with 
companies as going in with an inspection, walking out the door, 
and leaving the company a list of deficiencies and telling them 
they need to shut down overnight. Nothing could be further from 
the truth.
    These companies are usually long aware of the problems that 
they have had. We have cited them a number of times, and we 
continue to meet regularly with firms that are having 
difficulty maintaining quality manufacturing. We are also 
beginning the process of improving our new drug shortage 
database for internal tracking of shortages, as well as 
utilizing the database to develop better prediction models for 
who might be at risk.
    And finally, we've initiated communication with the 
Department of Justice as directed in the Executive order about 
how to share information that we receive about price gouging 
out in the community, and we understand that the Department of 
Justice is also reaching out to the National Association of 
Attorneys General to understand whether there are State and 
local laws that can help address some of these problems.
    Overall, our goal is to ensure that we and all of our 
stakeholders share and act on the same commitment to high-
quality drugs that the American public can continue to rely on 
when they need them.
    I look forward to working with you, and I am happy to 
answer questions.
    [The prepared statement of Dr. Kweder follows:]
               Prepared Statement of Sandra Kweder, M.D.
                              introduction
    Mr. Chairman and members of the committee, I am Dr. Sandra Kweder, 
Deputy Director, Office of New Drugs in the Center for Drug Evaluation 
and Research (CDER) at the Food and Drug Administration (FDA or the 
Agency). Thank you for the opportunity to be here today to discuss the 
growing problem of drug shortages. This is a very troubling situation 
and one that FDA takes very seriously. We are committed to addressing 
this problem and are eager to continue to work with others to help find 
short- and long-term solutions to the challenge of drug shortages.
    Today I will provide background on drug shortages, explain some of 
the reasons for drug shortages, and discuss FDA's ongoing actions to 
prevent or mitigate shortages as well as the more recent efforts by the 
Administration to further reduce and prevent drug shortages. The latter 
includes an Executive order issued by President Obama on October 31, 
2011, that will help address the shortage of prescription drugs and 
help ensure patients have access to the lifesaving medicines they need.
Background
    FDA defines a drug shortage \1\ 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. The impact of drug shortages on patients can be 
significant and even life-threatening. Certain drugs that recently have 
been in shortage--such as ``crash cart'' drugs--can literally be 
lifesaving in the acute setting, while others, such as outpatient 
chemotherapy drugs, must be administered within days or weeks to 
provide maximum benefit. Shortages of these drugs not only have an 
impact on clinical decisionmaking, but they could also significantly 
affect patient outcomes. For example, a shortage of propofol, which is 
used as a sedative and for general anesthesia, led clinicians to 
substitute etomidate, resulting in eight suspected cases of phlebitis 
(inflammation in a vein) in a single hospital system. Other drugs that 
have experienced shortages, such as the cancer drug cytarabine, arc 
important drugs not only because they treat a critical disease, but 
also because they lack an effective alternative.
---------------------------------------------------------------------------
    \1\ CDER Manual of Policies and Procedures (MAPP) 6003: http://
www.fda.gov/downloads/
AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/
ManualofPoliciesProced-
ures/UCM079936.pdf.
---------------------------------------------------------------------------
    In addition, drug shortages are impacting research studies. The 
National Cancer Institute (NCI) recently reported that while there have 
been periodic shortages of different cancer drugs over the past several 
years, nothing has approached the scale of the current shortages of 
chemotherapy drugs. NCI notes that the inability to obtain adequate 
supplies of these cancer drugs for research has resulted in promising 
clinical trials being suspended indefinitely; patient enrollment being 
abruptly halted; and trials being delayed while alternative treatment 
regimens are developed.
    FDA's awareness of these consequences for patients drives our 
efforts to prevent and resolve shortages as soon as possible.
    The number of drug shortages has been rising steadily over the last 
5 years. In 2005, CDER reported a total of 61 shortages; by 2010, that 
number had risen to 178.\2\ The rising trend of drug shortages has 
continued into 2011, with 220 shortages tracked by FDA from January 
through October of this year. Although shortages can occur with any 
drug, shortages of sterile injectables currently make up a large and 
increasing share of these shortages, despite the fact that sterile 
injectable drugs comprise a small percentage of the overall 
prescription drug market. These include critical products such as 
oncology drugs, anesthetics, parenteral (intravenous) nutrition drugs, 
and many drugs used in emergency rooms.
---------------------------------------------------------------------------
    \2\ ``A Review of FDA's Approach to Medical Product Shortages Drug 
Shortage Report'': http://www.fda.gov/AboutFDA/ReportsManualsForms/
Reports/ucm275051.htm.
---------------------------------------------------------------------------
    Of the 127 drug shortages tracked by FDA during the period from 
January 1, 2010, to August 26, 2011, oncology drugs accounted for 28 
percent of shortages, followed by antibiotics at 13 percent. One 
hundred eighteen shortages (93 percent) involved medically necessary 
drugs and 52 of the shortages (41 percent) were both medically 
necessary and sole-source drugs.\3\ For the purpose of prioritizing our 
work to address shortages, we consider a drug medically necessary if it 
is used to prevent or treat a serious or life-threatening disease or 
medical condition for which no acceptable alternative drug is 
available.
---------------------------------------------------------------------------
    \3\ ``A Review of FDA's Approach to Medical Product Shortages Drug 
Shortage Report'': http://wwwfda.gov/AboutFDA/ReportsManualsForms/
Reports/ucm275051.htm.
---------------------------------------------------------------------------
Reasons for Drug Shortages
    There is no single reason that drug shortages occur. The Agency has 
identified a variety of root causes of drug shortages, some of which I 
will discuss here. Ultimately, in any given drug shortage, many factors 
are involved, and underlying causes may operate alone or in combination 
to result in an individual shortage. These include, but are not limited 
to, industry consolidation, shortages of underlying raw materials, 
inventory and distribution practices, difficulty in producing a given 
drug (e.g., sterile injectables, which entail a much more complex 
manufacturing process than solid dosage forms), quality and 
manufacturing problems, production delays, discontinuations for 
business reasons, and unanticipated increases in demand.
    Of the 127 drug shortages tracked by FDA during the period from 
January 1, 2010, to August 26, 2011, 50 percent were generic or 
unapproved drugs \4\ (often drugs that have been on the market for 
decades, but which have never received FDA approval), 43 percent were 
innovator drugs, and 7 percent had both categories in shortage. Sterile 
injectable medications accounted for 102 drugs in shortage (80 percent 
of the total 127) and approximately 54 percent of these shortages were 
due to product quality issues such as particulates, microbial 
contamination, impurities and stability changes resulting in 
crystallization.\5\
---------------------------------------------------------------------------
    \4\ Unapproved drugs are drugs that have not received FDA approval 
to be legally marketed.
    \5\ ``A Review of FDA's Approach to Medical Product Shortages Drug 
Shortage Report''. http://www.fda.gov/AboutFDA/ReportsManualForms/
Reports/ucm275052.htm.
---------------------------------------------------------------------------
    Industry consolidation has also contributed to the drug shortage 
problem. In 2010, the top five generic sterile injectable manufacturers 
accounted for 80 percent of the sterile injectables sold in the U.S. 
market by volume.\6\ When a firm has a manufacturing or quality 
problem, they may voluntarily suspend production so they can identify 
and address the root cause of the product--quality problem. Some of 
these quality issues are complex and firms need to take significant 
time to correct the underlying cause of the problem. Such is the case 
with shortages of older sterile injectables, which involve special 
techniques and processes to maintain sterility. When one firm 
experiences a quality problem that results in production holds or 
slowdowns, the remaining firms are often not able to make up the 
shortfall, because they have limited manufacturing capacity.
---------------------------------------------------------------------------
    \6\ ``A Review of FDA's Approach to Medical Product Shortages Drug 
Shortage Report'': http://www.fda.gov/AboutFDA/ReportsManualForms/
Reports/ucm275051.htm.
---------------------------------------------------------------------------
    Inventory and distribution practices by manufacturers and 
distributors can alter the availability of drugs, often creating short-
term shortages. Better technology for supply management may lead 
manufacturers or distributors to reduce the size of their inventories. 
This minimizes product loss from short expiration times and carrying 
costs. However, smaller inventories mean that there are fewer reserves 
available to respond in the event of production problems. Overall, it 
does appear that inventories are smaller due to a shift to ``just in 
time'' production, and that leaves little leeway for even small changes 
in supply.
    Some reports in the media about drug shortages have focused on the 
lack of raw materials necessary to manufacture certain classes of drugs 
that are currently experiencing shortages. In the past, some shortages 
of drugs have been due to shortages of underlying raw materials, 
particularly of the active pharmaceutical ingredient (API) for a 
specific drug. However, this does not appear to be a significant 
contributor to the current shortages of sterile injectables. In fact, 
in 2010 and 2011, drug manufacturers cited unavailable API as the 
primary cause in less than 10 percent of drug shortage situations.
Actions to Prevent or Mitigate Shortages
    In 1999, FDA formed the Drug Shortage Program (DSP) within CDER in 
an effort to begin monitoring and mitigating the impact of drug 
shortages. DSP facilitates the prevention and resolution of shortage 
issues by collaborating with FDA experts, industry, and other external 
stakeholders. In addition, DSP provides information about drug 
shortages to the public, health care professional organizations, 
patient groups, and other stakeholders.
    When FDA becomes aware of a potential drug shortage, either from 
pharmacists, physicians, pharmacy organizations, manufacturers or other 
sources, the Agency works collaboratively with the affected firm or 
firms to return the product to its usual market availability as quickly 
and as safely as possible, while helping prevent any harm to patients. 
Although FDA cannot require firms to continue production of a product 
or increase production in response to a shortage, it does encourage 
other firms that make the drug to ramp up production, if they are 
willing and able to do so. FDA also expedites the review of submissions 
from manufacturers that may alleviate the drug shortage, which may 
include requests from existing manufacturers to extend the expiration 
date of products, make manufacturing changes to increase capacity, use 
a new raw material source, or change product specifications, as well as 
applications from new manufacturers who may be willing to enter the 
market to address a shortage situation. When a shortage is caused by 
manufacturing and quality problems, FDA works directly with the 
affected firm to develop short- and long-term solutions to the 
problems. FDA can also use its regulatory discretion for a manufacturer 
to continue marketing a medically necessary drug, if the manufacturer 
can develop a method to resolve a quality issue prior to the drug's 
administration.
    FDA carefully considers the impact of any drug shortage on patient 
care and access before taking any enforcement action. One example of a 
situation in which FDA worked closely with a manufacturer to address a 
quality concern was the case of the shortage of the drug cytarabine, a 
sterile injectable drug that is used to treat certain types of 
leukemia. Beginning in 2010, a manufacturing change led to crystal 
formation in the vials of cytarabine, which poses an extremely 
dangerous situation to patients. FDA worked with the manufacturer and 
found that if the vials were warmed, the crystals would dissolve and 
the danger to patients would be mitigated. Utilizing our regulatory 
discretion, FDA permitted the manufacturer to ship the vials with a 
letter to health care professionals, notifying them to inspect for 
crystal formation and, if present, to warm the vials to dissolve 
crystals to ensure patient safety. The use of regulatory discretion 
helped alleviate this critical shortage temporarily until the 
manufacturer was able to determine the cause and resolve the crystal 
formation problem.
    In other cases, FDA has been able to mitigate potential shortages 
due to the discovery of metal shavings and other foreign particles in 
injectable drug products. A recent example was sodium phosphate, which 
is a medically necessary electrolyte needed for IV nutrition in 
critically ill patients. In early 2011, the manufacturer found foreign 
particles in the drug product, posing a significant safety concern to 
patients. After the manufacturer generated data showing the particles 
could successfully be removed with a filter and with that process the 
drug could be used safely, FDA exercised regulatory discretion for the 
drug to be shipped with a letter to notify health care professionals 
that the filter needed to be used with the drug. This allowed the drug 
to be available for patients while the firm addressed the particulate 
issue for future production and averted the risk to patients of having 
particulate matter injected into their veins.
    FDA can also use its regulatory discretion with regard to the 
temporary import of non-FDAapproved versions of critical drugs, when a 
shortage cannot be resolved immediately. However, there are several 
factors that limit the applicability of this option. The product may 
already be in shortage abroad, which may hamper our ability to 
alleviate the problem in the United States. In addition, although there 
may be foreign suppliers that possess or have access to a particular 
drug, these suppliers are not necessarily FDA-approved and may need to 
be inspected, and their drug labels evaluated, before a product can be 
imported into the United States. Once a foreign firm is identified as 
willing and able to supply the drug, FDA can exercise enforcement 
discretion for the temporary import of a foreign drug after ensuring 
there are no significant safety or efficacy risks for U.S. patients. 
The temporary importation is tightly controlled and distribution is 
closely monitored. For example, FDA must ensure that drugs imported 
from abroad are manufactured in a facility that meets FDA quality 
standards. FDA will then post information about the imported drug on 
the drug shortage Web site.\7\ FDA has done this for the import of a 
number of critical drugs during a shortage, including: propofol, 
Foscarnet, ethiodol, thiotepa, norepinephrine, Xeloda, leucovorin and 
levoleucovorin.
---------------------------------------------------------------------------
    \7\ http://www.fda.gov/Drugs/DrugSafety/DrugShortages/
ucm050792.htm.
---------------------------------------------------------------------------
    As noted above, FDA does not have the statutory authority to 
require firms to continue production if they decide to stop, or require 
other firms to increase production in response to a shortage. Firms are 
statutorily required to provide FDA with notice of manufacturing 
discontinuations only in limited circumstances, and FDA lacks explicit 
authority to impose penalties on firms that do not submit required 
reports of discontinuations. Prompt notification is important for all 
disruptions in supply that could lead to shortages. Early notification 
leads to a better chance of timely resolution. In 2010, FDA was able to 
prevent 38 drug shortages due to early voluntary notification from 
firms, and in 2011, FDA has prevented 195 drug shortages as a result of 
voluntary notification and close collaboration with manufacturers to 
avert shortage situations.
Recent Efforts to Further Reduce and Prevent Drug Shortages
    Although our work has enabled the Agency to successfully prevent 
233 shortages since the beginning of 2010, drug shortages are on the 
rise. In response to this growing problem, the Administration has taken 
several recent actions to better understand and respond to drug 
shortages.
    In July of this year, Dr. Howard Koh, Assistant Secretary for 
Health at the Department of Health and Human Services (HHS or the 
Department), convened a series of meetings with representatives from 
across the Department to find out more about the root cause of 
shortages and what steps could be taken within existing authorities to 
decrease the frequency of shortages in the future.
    On September 26, 2011, FDA hosted a public meeting to gain 
additional insight into the causes and impacts of drug shortages, and 
possible strategies for preventing or mitigating drug shortages. 
Interested parties who attended included professional societies, 
patient advocates, industry, researchers, pharmacists, and other health 
care professionals. A docket has been opened in relation to the public 
workshop where comments can be received from the public.\8\
---------------------------------------------------------------------------
    \8\ ``Drug Shortage Docket Web site: http://://www.regulations.gov/
#!documentDetail;D=FDA-2011-N-0690-0001.
---------------------------------------------------------------------------
    On October 31, 2011, the Administration took a series of steps to 
reduce drug shortages. This included the issuance of an Executive order 
by the President,\9\ which directed FDA, in cooperation with the 
Department of Justice, to take action to help further reduce and 
prevent drug shortages, protect consumers, and prevent price gouging. 
In an effort to encourage broader reporting of manufacturing 
discontinuances, the President's order directs FDA to use all 
appropriate administrative tools to require drug manufacturers to 
provide adequate advance notice of manufacturing discontinuances that 
could lead to shortages of drugs that are life-supporting or life-
sustaining, or that prevent debilitating disease. The Executive order 
also requires FDA to expand its current efforts to expedite review of 
new manufacturing sites, drug suppliers, and manufacturing changes to 
help prevent shortages. Under the President's Order, FDA is also 
directed to work with the Department of Justice to examine whether 
secondary wholesalers or other market participants have responded to 
potential drug shortages by hoarding medications or raising prices to 
gouge consumers, and whether these actions are consistent with 
applicable laws.
---------------------------------------------------------------------------
    \9\ http://www.whitehouse.gov/the-press-office/2011/10/31/
executive-order-reducing-prescription-drug-shortages.
---------------------------------------------------------------------------
    On the same day the President signed the Executive order, the 
Administration announced its support for bipartisan legislation (S. 296 
and H.R. 2245) \10\ that would require all prescription drug shortages 
to be reported to FDA and would give FDA new authority to enforce these 
requirements. The Administration also announced that, over the coming 
weeks, FDA would provide additional staffing resources to enhance the 
Agency's ability to prevent and mitigate drug shortages. HHS released a 
report, prepared by the Office of the Assistant Secretary for Planning 
and Evaluation (ASPE), which is detailed further in their testimony 
today. Additionally, FDA released a report entitled ``A Review of FDA's 
Approach to Medical Product Shortages'' \11\ on its role in monitoring, 
preventing, and mitigating drug shortages, which included 
recommendations to further reduce the impact of these shortages.
---------------------------------------------------------------------------
    \10\ Press Release: http://www.whitehouse.gov/the-press-office/
2011/10/31/we-can-t-wait-obama-administration-takes-action-reduce-
prescription-drug.
    \11\ http://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/
ucm275051.htm.
---------------------------------------------------------------------------
    In addition, FDA sent a letter to pharmaceutical manufacturers,\12\ 
reminding them of their current legal obligations to report certain 
discontinuances to the Agency, and urging them to voluntarily notify 
FDA of all potential disruptions of the prescription drug supply to the 
U.S. market, even where disclosure is not currently required by law. 
The letters to manufacturers and the Executive order have produced a 
significant increase in the number of potential shortages reported to 
FDA. In the 10 months preceding the Administration's actions (January 
through October 2011), the Agency received an average of approximately 
10 notifications per month. In the 4 weeks following the letters to the 
manufacturers and issuance of the Executive order, we received 61 
notifications, a sixfold increase.
---------------------------------------------------------------------------
    \12\ http://www.fda.gov/Drugs/DrugSafety/DrugShortages/
ucm277675.htm.
---------------------------------------------------------------------------
    Other recent activities FDA has been working on to help prevent or 
mitigate drug shortages include:

     Doubling the number of staff in the Center to assist in 
coordination and response activities, as well as expediting actions 
(e.g., inspections) that would help to alleviate drug shortages;
     Developing several guidances for industry on reporting 
product disruptions, supply interruptions, and potential shortages;
     Meeting with various stakeholders to discuss shared 
opportunities to prevent and mitigate shortages, including; the Generic 
Pharmaceutical Association, the Pharmaceutical Research and 
Manufacturers of America, the Biotechnology Industry Organization and 
drug wholesalers;
     Exploring options for improving the drug shortage database 
for the internal tracking of shortages, as well as utilizing the 
database to develop prediction models for drug shortages;
     Assessing commercial systems that could be contracted to 
provide ongoing or periodic data on sales and distribution of drugs at 
the wholesale level to detect early signals of potential shortages or 
supply disruptions;
     Working with the Department of Justice, as directed in the 
Executive order, regarding issues related to price gouging and 
hoarding, including reports from pharmacists and other health care 
providers in connection with drug shortages;
      Announcing a public meeting on proposed recommendations 
for establishing a generic drug user fee. The primary goal of this user 
fee program is to bring median time to approval from around 30 months 
to a primary review goal of 10 months. This will bring generics to 
market faster, which should help alleviate shortages. In addition, FDA 
will continue to prioritize review of generic applications for products 
that are in shortage situations.
                               conclusion
    FDA and the Administration are committed to addressing the 
important issue of drug shortages. FDA is doing everything it can under 
its current administrative authority to help prevent and mitigate drug 
shortages. As noted previously, there has been a significant increase 
in the number of notifications as a result of the letters to 
manufacturers and the Executive order, which will continue to help 
mitigate a substantial number of drug shortages. It is our goal to 
continue a healthy and substantive dialogue with all interested 
stakeholders, both internally and externally, as we seek a solution to 
the problem of drug shortages. This is a challenge that we must work 
collaboratively to solve. FDA has taken a number of important steps and 
will continue to work with industry, providers and patients to address 
this issue. We also recognize the important role that you and other 
Members of Congress play, and we welcome the opportunity to discuss 
this important topic with you both today and moving forward.

    The Chairman. Thank you both very much. We'll start a round 
of 5-minute questions.
    Dr. Glied, reading your testimony last night, what caught 
my eye was this paragraph. You said,

          ``It's important to note that the low price 
        responsiveness of demand for sterile injectable drugs 
        also has implications for inventories and capacity 
        decisions. If there is an excess supply of a particular 
        drug, there may be no market for it, even at low 
        prices.''

    And you say,

          ``The combination of limited ability to compel supply 
        through failure-to-supply clauses or contractual breach 
        provisions and low price responsiveness means that 
        manufacturers face a symmetry of incentives. There is 
        little cost of producing too little of one drug, but a 
        potentially high cost of producing too much of that 
        drug.''

    OK. How do you solve that conundrum?
    Ms. Glied. It's a challenging problem because I think one 
of the things we need to think about here is how--one of the 
things that we raise in the paper that we wrote is how to think 
about the private market responding to a lot of this change, 
because if we think about this sector, it's really mostly a 
private market issue. The group purchasing organizations are 
private, and the drug manufacturing firms are private also.
    So one of the things that the economists we spoke with 
suggested to us is that some of this could happen through the 
contracting processes that exist between the group purchasing 
organizations and the manufacturers, trying to essentially have 
the group purchasing organizations put more of a premium on 
having the supply in hand, not just getting the lowest price 
but making sure that the manufacturer really actually has that 
supply available.
    That's something that's got to work itself out in the 
market, because right now the real challenge is if you're a 
manufacturer, you want to produce just the right amount for the 
market, and in the cases where there's only a sole source 
manufacturer, that's not such a complicated problem. You know 
what the market is, you can produce it. But when there are two 
or three different companies producing the same drug, and 
that's typical for this generic kind of industry, you're not 
only thinking about how much you produce, you also have to 
think about how much your competitors are likely to produce, 
and you can create real instability in the market as those 
things turn around.
    The Chairman. Then your report discusses how better 
``failure supply clauses'' in these group GPO contracts could 
help mitigate the drug shortage crisis. Can you elaborate on 
that?
    Ms. Glied. One of the things that we learned in talking to 
group purchasing organizations and manufacturers is that most 
group purchasing organization contracts do include a clause in 
them that says that if a manufacturer is unable to produce a 
drug that they were contracted to supply, they have to pay the 
difference between the cost of the drug at the price that they 
contracted for and the price at which somebody can buy the 
drug.
    Unfortunately, what happens is that when a drug goes into 
shortage and you can't buy the drug at any price, those 
contracts become moot, they don't hold any force anymore. So we 
thought that one of the things that might happen here is that 
private sector manufacturers might work with those contract 
terms to try and make them work so that even in the case of a 
supply shortage, you would push a little bit more of that 
responsibility to the manufacturers.
    The Chairman. Dr. Kweder, again looking at your testimony, 
one thing that caught my eye last night in reading this is that 
FDA does not have the statutory authority to require firms to 
continue production if they decide to stop, or require other 
firms to increase production in response to a shortage. Firms 
are statutorily required to provide FDA with notice of 
manufacturing discontinuations only in limited circumstances, 
and FDA lacks explicit authority to impose penalties on firms 
that do not submit required reports of discontinuations.
    How important an aspect to this shortage problem is that?
    Dr. Kweder. We think it's extremely important. The root of 
them from our window is--we don't get into the finances--is 
when a company is having problems producing a quality product, 
they're having trouble in a plant, they do not--until there is 
a crisis--they typically do not come to FDA and say we're 
having a problem here, we need your help, we think we're going 
to have a problem producing a product. It's not our job to go 
to our competitors and ask them to ramp up production of a 
critical product, but we need some help.
    If we know about that, we can do that.
    The Chairman. My time is running out. One last thing. So if 
you've got two, three or four manufacturers and if they each 
supplied you with this information, then you would be able to 
tell whether or not we're facing a shortage from one day to the 
other.
    Dr. Kweder. That's right. That's exactly right.
    The Chairman. Thank you very much.
    Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman.
    Dr. Glied, the president of the Generic Drug Manufacturers 
Association, Mr. Ralph Neas, has told the committee that drug 
pricing issues are not the cause of the current drug shortages. 
Do you agree with Mr. Neas and the Generic Drug Manufacturers 
that pricing is not the cause of the current shortages?
    Ms. Glied. Yes, sir. I agree.
    Senator Enzi. Thank you.
    Dr. Kweder, how many supplemental and new generic 
applications are in the current backlog that could help 
mitigate a shortage if they were approved? Is FDA prioritizing 
or expediting these applications for review?
    Dr. Kweder. The answer to the second question is 
absolutely, yes. We do have a longstanding backlog of generic 
drug applications, but it's important to look at what those 
applications are, and they can be for things like a new 
application, a new drug producer, they can be for a new source 
of an ingredient, or for a manufacturing change.
    We do monitor that queue and are well aware of the ones 
that--as we hear about potential drug shortages, we are 
constantly looking at that queue to pull things out that might 
expedite them in order to prevent a drug shortage, which is one 
of the reasons that early notification of a potential problem 
is so important. That's exactly what we can do.
    Senator Enzi. Thank you. I've also heard about the amount 
of time that it takes for different stakeholders, ranging from 
6 months to 3 to 4 years for approval. How long does it take to 
get FDA approval to a manufacturing facility change? Can you 
give some specific examples where the FDA has met the 6-month 
goal?
    Dr. Kweder. A lot of that depends on the facility or where 
the facility is. In many cases, companies are coming to us 
seeking to change facilities, and it's a facility that we know 
well. It's moving to another plant. Those can be turned around 
very, very quickly. If it's a facility in another country, for 
example, that we're familiar with, we often have a great deal 
of information about that facility, or if we don't, our 
international colleagues--who we have cooperative agreements 
with and understandings with--may have already inspected those 
facilities and be quite familiar with them, and share that 
information with us so that we can expedite action on that 
particular facility.
    There is a big difference in how we do business when we 
think there may be a critical product, a highly medically 
necessary product with a potential for supply, we can expedite 
those and meet those goals, and we do.
    Senator Enzi. Thank you. I was very impressed with your 
information about what's happened since October 31, when the 
President did his Executive order, and I won't ask you to 
provide it right now. If you can provide us with a list of the 
specific drug shortages that were prevented and how you did it, 
that might be helpful as we're doing the legislation as well.
    Dr. Kweder. We can do that.
    Senator Enzi. OK, thank you. And can you tell us how the 
Office of Generic Drugs coordinates with your office when 
evaluating applications for the manufacturing upgrades, active 
pharmaceutical ingredient approval, or drug applications?
    Dr. Kweder. Our office and the Drug Shortages Program work 
very closely. In effect, we have key contacts and kind of a 
SWAT team approach that's ongoing with the Office of Generic 
Drugs and our Office of Compliance, and the Office of New Drug 
Chemistry, all scientists who are involved in the actual review 
of the applications. So we coordinate very closely. We are in 
contact with them on a daily basis sharing information about 
what we're hearing, what applications they have, the status of 
those applications, and also ongoing interactions with anyone 
such as our inspectors in the field who may be going into any 
of those plants and working with companies to address problems. 
It's a daily contact.
    Senator Enzi. Thank you. I'll yield the balance of my time.
    The Chairman. Thank you, Senator Enzi.
    I have an order of appearance here: Senator Kirk, Senators 
Franken, Merkley, Isakson, Bennet, Bingaman, Whitehouse, 
Blumenthal, Casey and Hatch.
    Senator Kirk.
    Senator Kirk. I thought your testimony was outstanding in 
describing the problem. Dr. Kweder, I asked Shauna to prepare 
me for this hearing. I wanted to drill into one patient and one 
therapy in which we were in shortage. It's non-Hodgkin's 
lymphoma, and the shortage of doxorubicin. And the story of the 
shortage for non-Hodgkin's lymphoma patients I think is 
instructive of the problem here. It's supplied by three 
companies, and according to the briefing I got, doxorubicin 
shortage is due in part to one of the four companies that makes 
the drug, Teva Pharmaceuticals, was told earlier this year to 
stop manufacturing the drug by FDA.
    Meanwhile, demand for the drug has increased according to 
the American Society of Health System Pharmacists, and another 
supplier, according to ABC Bedford Laboratories, say they're 
currently facing a manufacturing and capacity constraint.
    So we have, I think, problems that we can solve and 
problems that we can't solve. If an individual private supplier 
is having difficulty or is deciding to get in or get out of 
business, I think it's a nonstarter for the Congress to order a 
private concern to produce a pharmaceutical which it does not 
want to produce. We should not get into that game.
    But with regard to the Teva Pharmaceuticals question where 
the FDA is ordering them to stop and then triggering a 
shortage, I agree with Senator Blumenthal that the Klobuchar 
legislation is good, but I would argue to go one step further. 
I very much appreciate the work that your office has done, and 
I think you are a very effective advocate inside FDA, but I 
would like you to have increased powers.
    My hope is that this committee could consider something 
like providing the Center for Drug Evaluation and Research a 
new authority that I would call, for lack of a better term, a 
patient care balancing authority, so that if we find a shortage 
which, in your testimony, was very good. You say total supply 
of the clinically interchangeable version of an FDA-regulated 
drug is inadequate to meet the current or projected demand at 
the patient level, that you then have a patient care balancing 
authority to take action within FDA to remedy the situation 
within 6 months.
    And I would argue that we should then go further and say if 
you find that the drug is vital to the survival of a patient 
which, for example, in oncology that would be the case, that 
your patient care balancing authority would be able to remove 
FDA barriers to supply within 1 month, and I don't think you 
would actually have to use this authority that much.
    But the fact that we have given you this authority would 
then give you so much greater weight inside the bureaucracy, 
because we make many decisions inside FDA to stop or halt or 
suspend, but if the decision is for patient death, we 
definitely need the Dr. Kweder operation, the CDER office to 
have greater authority, and I would call that a patient care 
balancing authority. But if you could comment?
    Dr. Kweder. First I want to correct something. FDA did not 
tell Teva that they had to stop producing.
    Senator Kirk. Oh, OK.
    Dr. Kweder. OK? And I think that's important. We had been 
working with Teva for quite some time on really major quality 
production problems. This was not a new situation. This was 
ongoing.
    They ultimately made the decision that the only way that 
they could correct it was if they shut down, and I can't 
comment on the specifics of whether that was entirely 
necessary. That's not within my purview today.
    I think the problem that ultimately resulted because, as 
you said, there were other companies producing it, is really 
illustrative of Dr. Glied's testimony and findings, that while 
there are other companies that produce it, they cannot--because 
of their production model, their 24/7 model--they cannot turn 
on a dime and ramp up production to meet a need when Teva makes 
a legitimate or not legitimate decision about what they need to 
do.
    I don't think that additional FDA authority, as much as I 
welcome additional authority, would necessarily fix that 
problem. I am happy to tell you that Teva is coming back online 
in producing doxorubicin, if it's not available already, and we 
recently approved yet another supplier. Pfizer, not typically a 
generic producer, has stepped in and started to produce that 
drug to help make up that shortfall. That will help hundreds of 
thousands of cancer patients. It's a success story.
    Senator Kirk. If I could just finish up, I just hope, 
though, that in your testimony you said we have a growing 
shortage problem, which means for whatever reason, patients are 
being disadvantaged.
    Dr. Kweder. That's right.
    Senator Kirk. And I'm particularly worried about their 
lives being lost. As Senator Franken said, if we switch from 
doxo to the other alternative, we just dropped the patient 
survival rate by two-thirds, and I would like you to have 
greater authority inside FDA to make that argument.
    Dr. Kweder. We'll be happy to work with you on that. Thank 
you.
    Senator Kirk. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Kirk.
    I have to excuse myself from presiding. Senator Enzi will 
preside in my absence.
    And next is Senator Franken.
    Senator Franken. Thank you, Mr. Chairman.
    I want to thank you both for your testimony.
    Dr. Kweder, in her written testimony, Dr. Glied said that 
43 percent of all shortages were caused by quality problems at 
drug manufacturing facilities. I've also heard that when some 
manufacturers have compliance problems with the FDA's good 
manufacturing practices, they take their product off the market 
rather than investing money to fix the problem.
    What could FDA do to help maintain the quality of drug 
lines while at the same time avoiding unnecessary shortages? 
And how often does FDA's compliance office coordinate with the 
drug shortages office so as to make sure that their actions do 
not precipitate a shortage?
    Dr. Kweder. Let me answer the last question first. We 
coordinate regularly with our Office of Compliance and our 
Office of Regulatory Affairs that is out in the field 
conducting inspections. In fact, we recently have changed our 
practice to require that before our district office people 
issue a letter or our Office of Compliance issues a warning 
letter, that they specifically address how any of the actions, 
any actions proposed might result in a drug shortage, take that 
into consideration.
    We do it already, but this sort of cements that process and 
assures it.
    The kinds of quality problems that are occurring in these 
plants, these are not people not crossing T's and dotting I's. 
The key to producing a quality product for particularly these 
injectable drugs is that they have to be produced under very 
tightly controlled circumstances. I don't know how many of you 
have ever been in one of these plants. If you're a woman, 
you're not allowed to wear nail polish in the plant, something 
that would seem to be quite permanent, because there's a risk 
that if it gets into the air or into the system, it could 
contaminate a product that would be injected into a cancer 
patient's veins. So maintaining quality is really the company's 
job.
    The standards are very straightforward. They are the same 
and have been, but modernized, current. They've been the same 
for a long time. And counter to what some would say, they are 
highly consistent across most Western nations. Our standards, 
the European Union standards, Australia, and Canada, are highly 
consistent and similar.
    We do work with companies. The first time we do an 
inspection and find a problem, we monitor them. We go back. We 
check on their progress. We require that they report to us what 
they are doing to address it. Oftentimes when we go back in and 
re-inspect, we find that none of those things have been done. 
So we go back through this again.
    Most companies do an outstanding job. But there are some 
that don't, and unfortunately some of the ones that are under 
the most production pressure are making the most drugs. These 
companies that are at the root of most of these shortages, Dr. 
Glied pointed out, make hundreds of products, hundreds. There 
is no cushion there for them to shut down a little bit to fix a 
problem or shut down temporarily.
    Senator Franken. Dr. Glied, according to a report your 
office released in October, about half the shortages, at least 
until 2010, were for oral medicines like tablets and capsules, 
not for injectable drugs. But for 2010, 74 percent of shortages 
involved sterile injectable drugs like anesthetics and 
chemotherapies.
    What brought about the sudden shortage of generic 
injectable drugs? And several proposals to address this problem 
have included changes to the physician reimbursement for these 
drugs. Are we really going to solve this by changing how we pay 
for health providers for drugs in shortage?
    Ms. Glied. Let me start with your second question, which is 
the easier one. As I think we pointed out, there's a quite 
rigid disconnect between the price that health providers are 
paid, the fee that they're paid to compensate for the cost of 
procuring drugs, and the price that manufacturers are paid by 
group purchasing organizations for those same drugs. In some 
cases, for example, when drugs are used under the Medicare Part 
A program, there's actually no fee paid in direct compensation 
to the provider at all, but the price that a manufacturer gets 
is based on a negotiation between a group purchasing 
organization and that manufacturer that encompasses all the 
drugs the provider uses regardless of who the payer is, whether 
it's private insurance or Medicare Part A or Medicare Part B.
    There's a really rigid disconnect there, and that's why I 
think we believe that changing the prices that are paid to 
health care providers would have no impact on the amount of 
money received by manufacturers in this sector.
    As to your first question, I think the problem is 
multifactorial, but one thing that we saw in the data that we 
looked at is that there has been a big increase in the volume 
and number of drugs available to generic manufacturers over 
this period, I think a very healthy increase that mainly came 
about because a lot of branded products went off patent. So the 
potential market for the generic manufacturers grew. At the 
same time the population is aging, and these sterile injectable 
drugs, that market is really growing very robustly.
    In the beginning, what that led these manufacturers to do 
is to increase their capacity utilization, and our hypothesis 
is that that increase in capacity utilization just led to more 
of the kinds of quality problems that Dr. Kweder has pointed 
out. Then you start having this cascading effect, because there 
are not that many manufacturers, not that many plants in this 
business. Once one of them goes offline because they're having 
a quality problem, it just cascades through the industry, and 
that's why we anticipate that it won't be until the new 
manufacturing capacity, which is in the works, really comes 
online that this problem is going to solve itself, and until 
then we really will need the FDA to keep managing it.
    Dr. Kweder. And I would add that we are working with those 
companies right now, as they are making plans for their new 
plants and trying to build quality in.
    Senator Franken. Thank you.
    Senator Enzi [presiding]. Senator Merkley, and then Senator 
Isakson.
    Senator Merkley. Thank you very much, Mr. Chair.
    I wanted to start simply by noting that the GAO report goes 
through a host of different strategies that FDA uses, eight 
different strategies, and that they fall largely into helping 
with manufacturing problems, helping with importation, and then 
flexibility in terms of allowing a drug to be marketed that 
maybe doesn't have the right labeling or right quality.
    It just strikes me as fascinating that a for-profit company 
is running into a manufacturing problem and FDA is able to help 
them resolve that problem. I don't quite understand. Can you 
explain to me how it is that these experts in manufacturing 
need your help to figure out how to solve a manufacturing 
problem?
    Dr. Kweder. I think that's a good question, and we struggle 
with that to some degree ourselves. One of the reasons that FDA 
can sometimes get involved is we see all of the companies. We 
see where they've been. We have a broader view of manufacturing 
processes than sometimes an individual company might. We also 
are able to work with them to help them identify new strategies 
because we've seen other companies use particular strategies.
    But as to the broader question about why they would come to 
FDA for advice, why they would need FDA's advice in the first 
place, I'm not sure that I have an answer for that. What we can 
do, though, is that we can help them prioritize by taking into 
account things like products that we think may be medically 
necessary or highly critical for patient care, and help them 
prioritize potentially a panoply of problems that they're 
trying to address at once.
    Senator Merkley. Let me move on. I'll leave that as a bit 
of a mystery for now.
    But neither of you has really gotten into this question 
that we keep hearing about, about the gray market, about groups 
that are following the drug market well enough to realize 
there's going to be a shortage and knowing that, basically 
corner the market on that drug, buy up the surpluses and 
accentuate the shortage, the scalping problem. And the fact 
that it hasn't featured prominently in either of your testimony 
is interesting to me because it's often put forward as part of 
why there's been such a dramatic change over a 2-year period.
    Is drug scalping a significant part of this problem?
    Ms. Glied. I think that what we would say is that the gray 
market is a symptom of the problem. I mean, it is a problem in 
itself, but it arises because of the underlying problem of 
shortages. If the problem of shortages weren't there, the gray 
market would not be able to exist and survive. Addressing the 
gray market is important because price gouging is a significant 
issue, but addressing the gray market by itself is, 
unfortunately, not going to solve the whole shortage problem.
    Dr. Kweder. And I would add that we don't actually have a 
lot of information about what's called the gray market. We get 
reports from pharmacists or health care providers or health 
systems about experiences they've had and what kinds of prices 
that they're paying, but this isn't an area where FDA has any 
authority, and it's one of the reasons that we are beginning to 
work with the Department of Justice, and we'll also have to 
work with the Federal Trade Commission, to try and understand 
this a little better and see what we can do.
    From our standpoint at FDA, some of the gray market 
activities are a signal to us to be aware that there may be 
counterfeit products involved, another challenge that we have 
in this country. It's a signal to us to begin to go into that 
zone and start to assess whether there may be counterfeit 
products at play.
    Senator Merkley. I'm running out of time, so I'll just note 
that I want to explore this more, because just as we see with 
tickets for a sporting event, if there is a high demand and low 
supply, scalping is far more effective, but the scalping 
accentuates the problem. And the fact that neither of you has a 
firm grip on the role it's playing says we really need to dig 
into this piece, because in many markets there's a response. 
The response is it's illegal to sell beyond the face value of 
the product. That can take the heart out of scalping overnight. 
I want to find out, is that something we need to do in this 
area?
    Thank you, Mr. Chair.
    Senator Enzi. Senator Isakson, and then Senator Bennet.
    Senator Isakson. Thank you, Mr. Chairman.
    Dr. Kweder, when you were responding to Senator Merkley's 
question regarding a pharmaceutical company coming in to you 
seeking advice when they've got a manufacturing problem, wasn't 
that the question? It would seem to me that would be logical. 
If I was producing a product and I was regulated by a 
government entity and I had competitors, I'd sure come to the 
Government rather than the competitor to give me advice, 
because all I'm doing is telling them I've got a problem. Am I 
right?
    Dr. Kweder. I think so.
    Senator Isakson. And does the FDA try and be a problem 
solver when a manufacturer comes to them and give them 
recommendations that they might have missed otherwise?
    Dr. Kweder. We consider our job to be problem solvers, and 
our job is to facilitate, help facilitate these companies being 
able to make a high-quality product. That is at the core of 
what we do.
    Senator Isakson. You said in your testimony that you 
prevented 96 shortages I think this year or last year.
    Dr. Kweder. Actually, that's just since October 31.
    Senator Isakson. Please tell us. I want to followup on 
Mike's question. How did you do that? That seems like why we're 
having the hearing, so I'd like to hear that.
    Dr. Kweder. Yes. In a lot of those cases what we have done, 
is worked with manufacturers to help them get certified 
additional supplies of critical ingredients, to help them bring 
a new production line on board, to make changes in their 
manufacturing process, or to help solve quality problems, help 
them find creative approaches to quality problems. They may be 
thinking about an approach and aren't sure about it. They'll 
come to us, and we'll have a conversation about what makes the 
most sense and what's the most pragmatic.
    Other things that we have done to prevent these shortages 
are, we have gone to competitors of these firms and encouraged 
them to ramp up production, thereby putting more in place on 
the market so if a company having a problem feels like they 
have to go offline, there will be supply available. In some 
cases we have gone to sources that are outside this country to 
help find alternative supplies.
    Those are just some examples. In other cases where there 
have been problems, where the company may be having a systemic 
problem on multiple lines and we think that one production line 
could be protected with additional controls to ensure quality, 
we have helped them continue making a product while other 
things around it were not able to be made.
    Finally, we have done some very creative things where, in 
response to one shortage, one company ramped up production and 
found that the stress of increasing production was leading to 
them having precipitate in their injectable drug. You looked at 
it and it was cloudy. Well, we worked with them to figure out 
that if you just warmed the vials, the precipitate would 
dissolve. What they were able to do was label the drug with 
that, send it packaged tightly with instructions and notify 
hospital pharmacies that would be administering it that that 
was the way to do it, rather than have to not ship the product.
    Those are some examples.
    Senator Isakson. Dr. Glied, I'm not a doctor, I'm not a 
pharmacist, I'm not scientifically inclined, so I may say 
something stupid right here, but the growth in cancer drugs in 
particular, but a lot of drugs, are biologics. When you talk 
about a sterile injectable, is that talking about a biologic?
    Ms. Glied. It could be a biologic. I don't think most of 
these are biologics.
    Senator Isakson. Then my question----
    Ms. Glied. I'm not a doctor either, so I have to confess.
    Senator Isakson. OK, that makes two of us. With the growth 
of biologics, have the shortages become disproportionately 
biologic-based drugs, or chemical compound drugs?
    Dr. Kweder. To date, the answer is no, but biologics do 
offer really special and challenging problems because there are 
not generic biologics, and they tend to be made by one company. 
Now, the good news about that is that companies guard their 
biologic production and monitor it very, very closely. But 
there is always the risk of unanticipated problems.
    We have had some of those. But the majority of the 
shortages, the vast majority, have been for nonbiologics or 
small-molecule drugs.
    Senator Isakson. OK. Thank you, Mr. Chairman.
    Senator Enzi. Senator Bennet, and then Senator Bingaman if 
he returns. Otherwise, Senator Whitehouse.
    Senator Bennet. Thank you. Thank you very much, Senator 
Enzi. And thank you for your testimony, both of you.
    Dr. Kweder, as you know, our country does not have a 
nationwide drug distribution system to know where drugs are 
across the supply chain from manufacturers to patients, and as 
a result, when hospitals and pharmacies are approached by 
distributors who may actually have an additional supply of 
pharmaceutical drug that may be in shortage, the hospitals and 
pharmacies can't always verify the legitimacy of that drug. And 
even in this time of fiscal constraint, that's why I'm 
supportive of a drug distribution system that does--while it 
doesn't create unduly burdensome costs for any part of the 
supply chain, it would provide us knowledge about where drugs 
are in the system, and I wondered whether you'd think it would 
be helpful for the FDA and other supply chain stakeholders to 
have information on the legitimacy and pedigree of a drug, 
particularly when a drug is in shortage.
    Dr. Kweder. Yes. I think that it won't solve a drug 
shortage problem, but it would allow hospitals, pharmacies, and 
the agency to have a better idea of whether a product is a 
legitimate product. I already mentioned that one of the 
concerns that we have about the gray market is whether some of 
these are actually signals of counterfeit, and that would make 
assessing that very much more straightforward.
    Senator Bennet. And it's my point of view, I don't know 
whether you would agree, but that there are a lot of reasons 
why we would want to be able to track pharmaceuticals across 
the country, but those reasons are particularly in stark relief 
when you think about the shortage issues. We'll look forward to 
working with you on that.
    Dr. Kweder. Thank you.
    Senator Bennet. I had a second question for you, as well. 
You mentioned in your testimony that FDA can use its regulatory 
discretion for temporary importation of nonFDA-approved 
versions of critical drugs when a shortage can't be resolved 
immediately, and you've noted that there may be foreign 
suppliers--you were just talking about this with Senator 
Isakson--that possess or have access to a critical drug but are 
not FDA-approved and may need to be inspected.
    At an earlier hearing on the safety of our drug supply, GAO 
reported that at FDA's current pace, all establishments abroad 
could be as long as 9 years from now. I wonder whether you 
think that FDA's desire to better use third-party resources and 
to use inspection information from other top-tier countries to 
maximize resources will have a positive effect on reducing drug 
shortages.
    Dr. Kweder. I think it already is having a positive effect 
on reducing drug shortages. We get a great deal of information 
from our regulatory counterparts in other countries, and they 
don't necessarily obviate the need for us to do inspections. We 
will often subsequently go and do that. But they provide us a 
great deal of assurance when we are using regulatory discretion 
to allow temporary importation of a critical-need product.
    We don't do that lightly. We look very carefully at what we 
should know from other countries' inspections about that 
particular product, and we haven't used it--it's not the first 
thing we try to do when we're addressing a shortage, but it is 
an extremely important tool.
    Senator Bennet. Actually, while we're on that topic, just 
out of curiosity, what do we know about drug shortages in other 
countries?
    Dr. Kweder. This is not a uniquely U.S. problem. This is 
occurring in other countries as well, and they utilize many of 
the same tools that we do to try and resolve them. We have 
monthly teleconferences with some of our regulatory 
counterparts, particularly the EU, Australia and Canada, to 
share information about shortages, and we work together to try 
and identify alternate suppliers, other creative solutions.
    Senator Bennet. Are there differences in the categories of 
drugs that are in short supply in other places?
    Dr. Kweder. I would say, in general, it varies a lot. 
Sometimes there is a lot of overlap. Sometimes there's not much 
overlap at all. Categories, I would say they're similar. Drugs 
that are hard to produce or that require specialized facilities 
to produce are much more vulnerable to this.
    Senator Bennet. Dr. Glied, do you have anything you'd like 
to add to that?
    Ms. Glied. Different countries have responded that they 
have shortages in different areas. We essentially share a 
supply chain with Canada, so they tend to have shortages in 
exactly the same areas that we do. When you go to countries 
like Australia that are farther away, their markets are 
operating somewhat differently. But I would agree with Dr. 
Kweder, that some of these drugs, ones where it's really hard 
to ramp up production because the facilities are specialized, 
are always going to be the ones most prone to shortages in 
every country.
    Senator Bennet. Thank you very much, both of you, for your 
work on all of this. And, Mr. Chairman, thank you for holding 
this hearing.
    Senator Enzi. Senator Whitehouse and then Senator 
Blumenthal.
    Senator Whitehouse. Thank you, Chairman.
    We've spoken quite a lot about the gray market in the 
course of this hearing. Could either of you describe for me 
what the gray market looks like, or is there a report that is 
not in the record of these proceedings that has taken a look at 
what the gray market looks like and who is participating and 
what their motivations are?
    Ms. Glied. We have not done a report on the gray market. I 
believe there is a report. I think the group purchasing 
organizations have put out a report on the gray market. I'm not 
absolutely sure.
    The gray market is a market that is buying drugs, often not 
directly from the manufacturers, often from suppliers, from 
providers who have extra capacity, we've been told. Some of 
these might be infusion clinics or somewhat--they're not 
necessarily the hospitals and physicians who are participating 
in the typical GPO arrangements. It's a very fragmented market. 
There are a lot of players in it, but I think we don't know 
very much about it because it's gray.
    Senator Whitehouse. For the record, doctor, I see your head 
nodding in agreement?
    Dr. Kweder. Yes, my head is nodding in agreement. We don't 
know a lot about it I think because, as Dr. Glied said, from 
the reports that we get, it does seem to be quite fragmented. 
For example, one of the ways that health care providers will 
learn about a product is they'll receive a fax in their office 
from some source advertising availability of a drug that's in 
shortage at an exorbitant price. In fact, I can tell you I did 
my fellowship training at Women and Infants Hospital, and some 
of my colleagues there have sent me some of these things that 
we have passed on.
    Senator Whitehouse. The gray market could include something 
as benign as Women and Infants Hospital calling around to other 
hospitals and saying we're short on this drug, do you have any 
to spare and would you sell it to us, which I think everybody 
in this room would think is a pretty benign form of trying to 
resolve the drug shortage issue. But it could also involve 
speculators who are--I see two heads nodding actively, just for 
the record--who are actively engaged in buying these products 
for the sake of hoarding them, selling them, and profiteering 
off of the shortage.
    Dr. Kweder. Yes. It's the profiteering that really raises 
red flags. It's not unusual in a community for one hospital to 
be in short supply of a particular product--maybe they've just 
used more this month than last--and to seek availability from 
another local facility. That isn't what we worry about. We 
worry about the latter.
    Senator Whitehouse. And I suppose you could make a case 
that given these shortages, and given the fact that hospitals 
and providers can misjudge how much they're going to need, 
there's actually a healthy role for a broker to be in the 
middle of this and find a profitable niche as a market maker.
    On the other hand, if they're sending unsolicited faxes and 
they're seeking to charge a significant markup, it begins to 
look pretty sordid. What type of practices are you seeing out 
there at the worst end of the spectrum?
    Even anecdotally.
    Ms. Glied. Just one of the things that I would also note is 
that one of the concerns in the gray market is that the quality 
of the goods, their pedigree, knowing what they actually are, 
is much harder to ascertain. So when these are purchased 
through traditional distribution channels, everybody has a good 
sense of what they're getting. And I think another concern with 
the gray market is also just the quality concerns. I just want 
to note that. We haven't heard reports of specific issues with 
the gray market. You might have heard more.
    Senator Whitehouse. And in terms of price gouging, what 
anecdotally are you hearing as the worst case scenarios that 
are taking place?
    Dr. Kweder. We have heard of 100-fold price increases.
    Senator Whitehouse. Not 100 percent, 100-fold.
    Dr. Kweder. One-hundred-fold price increases.
    Senator Whitehouse. A $4 drug going for----
    Dr. Kweder. A $4 drug going for----
    Senator Whitehouse [continuing]. Four hundred dollars.
    Dr. Kweder [continuing]. Going for $400, or $4,000. I mean, 
those are the kinds of reports that we hear of, and I think 
those are the ones that stand out, and probably many of them 
aren't quite to that extent. But those are the kinds of reports 
that many of your colleagues' constituents have sent in letters 
to us.
    Senator Whitehouse. I'll close because my time is expiring. 
But it strikes me that the two considerations are related in 
that an entity that is willing to engage in that kind of 
gouging is probably not morally opposed to selling low-quality 
or phony product as well for that kind of a markup.
    I'll yield back. Thank you, Mr. Chairman.
    Senator Enzi. Thank you.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman. And thank you 
both for your work and for your testimony today. I want to just 
take forward some of Senator Whitehouse's questions.
    In fact, there has been a report very recently by Premier 
which showed that in a 2-week period, 2 weeks, beginning of 
this year, 1,745 examples of gray market offers from 42 acute 
care hospitals, an average mark-up of 650 percent, and we're 
talking here about drugs that are absolutely critical in 
oncology, in cardiology, in emergency rooms. These workhorse 
medicines are not luxuries. They are essential critical care 
medicine, and someone is profiting. It is more than a symptom. 
It is more than just a by-product. It is part and parcel of a 
market that isn't working.
    Dr. Glied, you have said that there is a degree of 
concentration here that isn't seen in many other markets. That 
is a very polite way of saying that there is no competition. We 
have had a discussion here for close to 2 hours, an hour-and-a-
half, and the word ``competition'' so far, at least so far as 
I've heard, has not been mentioned. There is no competition 
here, which leads to these gray markets.
    So my initial question to you is, how many findings in the 
2 months since the President's order have been referred to the 
Department of Justice by the FDA?
    Dr. Kweder. I will have to get back to you on that, on the 
specific number.
    Senator Blumenthal. Do you know of any?
    Dr. Kweder. Yes, I do.
    Senator Blumenthal. How many do you know of?
    Dr. Kweder. I know of at least two, but I think there are 
more, and I'll have to get back to you on that.
    Senator Blumenthal. I think that is very, very important, 
and as much detail as you could provide I would appreciate.
    Don't you believe that some kind of overarching and 
intensive investigation is necessary here by either the FTC or 
the Department of Justice?
    Dr. Kweder. Let me just add that price gouging isn't 
something that would necessarily be reported to FDA. The 
information, the reports--the kinds of things that our Drug 
Shortage Program hears about is mostly hearing from companies, 
sometimes from health care providers or hospitalists.
    The specific report on the price they paid, that isn't 
something they'd bring to our attention.
    Senator Blumenthal. I understand that you may not receive 
all of the reports, but the President's order directs that you 
consult and--
    Dr. Kweder. When we do, we do--
    Senator Blumenthal. You do give that information to the 
Department of Justice.
    Dr. Kweder. Yes.
    Senator Blumenthal. That's why I'm asking you. Don't you 
think that there is a need for an investigation here by the FTC 
or the Department of Justice in light of these absolutely 
astonishing and appalling markups as part of the gray market?
    Dr. Kweder. It's not for me to decide who should do it, but 
I do think that we would like to understand this better.
    Senator Blumenthal. Well, I would take that as a yes, 
unless you disagree. And I recognize----
    Dr. Kweder. You can take that as a yes.
    Senator Blumenthal. Thank you. Do you know who is 
profiting?
    Dr. Kweder. We do not know because we don't understand the 
whole lay of the land. There are certainly--there is a system 
out there of legitimate wholesalers and distributors. Whether 
those are the same parties who are in the business anyway who 
are involved in this, or whether there are just sort of people 
coming in and out of the landscape, we just don't know.
    Senator Blumenthal. So it could be the manufacturers?
    Dr. Kweder. I guess it could be, but we don't have any 
reason to think that it is.
    Senator Blumenthal. And it could be the wholesalers or 
distributors?
    Dr. Kweder. That's right. We just--
    Senator Blumenthal. And it could be the hospitals.
    Dr. Kweder. We just don't know.
    Senator Blumenthal. So there really is a need for some kind 
of fact-finding here on a broader basis than just an individual 
finding of a particular drug being in shortage.
    Dr. Kweder. Yes, and we understand--I mean, one of the 
reasons it's called--it's not black or white, it's gray. It's 
also gray, as Dr. Glied said, because we don't understand it 
very well. And so having a really clear picture of how this 
operates, who is involved, and what the factors are that are 
motivating it and rewarding it would be very helpful.
    Senator Blumenthal. I am almost out of time, but I just 
want to suggest, and you should feel free to disagree, that at 
the very minimum there ought to be a ban on any secondary 
sales--that is, sales after the initial purchase--at a price 
higher than that initial purchase of these kinds of drugs, 
which would be a remedy against this kind of hoarding and 
profiteering and gray market. In other words, a hospital or a 
wholesaler or anyone that purchases the drug should not be 
permitted to sell it at a higher price than it was originally 
purchased. That's the basic concept. I recognize there will be 
a lot of elaboration on it, but I'd just open it for your 
comment, if you have any.
    Ms. Glied. I think it's something that we should definitely 
take under consideration and talk to the folks at the DOJ and 
FTC about how that might work.
    Senator Blumenthal. Thank you, Mr. Chairman.
    The Chairman [resuming the chair]. Senator Casey is next.
    Senator Casey.

                       Statement of Senator Casey

    Senator Casey. Mr. Chairman, thank you very much. I 
appreciate you having this hearing, and I appreciate the work 
you've done, and the Ranking Member, and so many others on both 
sides of the aisle at a time when we have a lot of news 
stories, many of them based upon the reality of Washington 
about how Democrats and Republicans don't work together. This 
is one issue where you've had I think a broad consensus, and 
not just for purposes of a hearing but over many, many months 
now to come together, and I've been so honored to work with 
people in both parties, working on the original legislation 
that Senator Klobuchar and I introduced, and I know I missed 
her presentation today, so I'm first of all apologizing for 
that. I've been in and out of the hearing.
    I want to thank our witnesses. The gravity of this is hard, 
really hard to fully comprehend or fully articulate because 
this is so immediate and so grave for families. I would like to 
recite a story, and I'll abbreviate this, but it's the story of 
Sarah Batalka. She's a 29-year-old woman from Pennsylvania, and 
here's what she wrote to me, and I'm reading in part.
    She said,

          ``In April of this year, I got the worst possible 
        news. There's a drug shortage crisis nationwide. I was 
        told by my home infusion company that their supply of 
        magnesium sulfate, a key ingredient in my IV bags, and 
        one without which I cannot survive, was dwindling, and 
        that they had only enough to fill the IV bags for a few 
        more weeks.''

    She goes on to say,

      ``To give you some idea of the impact of this news on me, 
please consider what it would feel like to you if someone told 
you that there would be only enough air supply left for 3 weeks 
of breathing.''

    That gives you a sense of the intensity and proximity of 
the threat that people feel.
    I also will note, and I'll introduce Dr. Maris later for 
the next panel, but a lot of his testimony, working as he does 
so well at Children's Hospital in Philadelphia, is about the 
impact on children, children with leukemia, and all of the 
horrors and nightmares those children live through and their 
families.
    This is about as urgent as it gets for work that we're 
supposed to be doing in Washington.
    Let me just try, in the remaining time I have, to just get 
to a couple of questions.
    Dr. Glied, and I know you're speaking from the vantage 
point of Health and Human Services, I want to ask you, in your 
testimony you said that many--and I'm paraphrasing here--but 
many of the current supply problems will be alleviated when new 
capacity comes online. I know you may have addressed this more 
than once, but I want to make sure that I understand.
    How do you arrive at that assessment? I didn't read your 
exact words, but how do you arrive at that assessment that you 
think this will be alleviated when new capacity comes online?
    Ms. Glied. When we spoke to the generic manufacturers, and 
also just read news reports and looked at information from the 
FDA, we learned that several of the manufacturers are planning 
to build or are already building new manufacturing capacity and 
upgrading their existing capacity. Our analysis suggested that 
the big problem here is that the existing capacity is just not 
enough to really be able to manage, to produce the amount of 
drugs that there's now a demand for with a sort of sufficient 
cushion to be able to deal with quality problems that may come 
up or changes in other manufacturers' production lines and 
other things like that.
    We really need to have that extra capacity come on before 
we can really solve this problem. We can manage it until then, 
but it isn't going to go away by itself until that extra 
capacity is there.
    Senator Casey. OK. What a lot of us are worried about, 
including you and everyone here, is that there may not be an 
alignment between that capacity coming online and the urgency 
of the problem when you have only weeks within which to solve a 
shortage problem.
    Let me just ask it this way. Tell us whether it's 
responding to us or responding to Sarah, whom I just quoted a 
moment ago, or anyone else, tell us what are the things we've 
got to do in the next couple of weeks or months to address this 
problem.
    Ms. Glied. What we have to do in the short run is really 
help FDA try and manage the situation we're in right now, which 
is one of limited capacity and big demand. We can't produce 
more. What we have to do is align what we're producing better 
with the need, and that's what we have to do in the short run.
    Senator Casey. Dr. Kweder, did you have something to add to 
that?
    Dr. Kweder. I think what we need to do is get companies who 
are experiencing production problems to engage with us early 
and not wait until they have a critical situation. We have 
learned by doing this for years now that it may not address 100 
percent of these circumstances, but boy, does it help us 
mitigate them and prevent them. Preventing shortages is 
absolutely what we should be looking at.
    Senator Casey. Thank you.
    [The prepared statement of Senator Casey follows:]

                  Prepared Statement of Senator Casey

    Mr. Chairman, I would like to thank you and Ranking Member 
Enzi for convening this hearing today. The unprecedented growth 
in prescription drug shortages is among the most pressing and 
serious issues confronting the American health system. It is 
unacceptable that we are unable to help seriously ill patients 
not because we don't know how, but because we don't have enough 
of a product that we know saves lives to go around. How can 
this be happening in our country? We cannot allow this to 
happen on our watch.
    This is a problem that was brought to my attention in the 
fall of 2011 by a hospital in Pennsylvania: Lancaster General. 
Since that time, I have heard from more than 50 hospitals and 
pharmacists in the State about how the drug shortage crisis is 
affecting their ability to provide care. I am glad that we have 
a witness here today, Dr. John Maris from the Children's 
Hospital of Philadelphia, to talk about how this issue has 
impacted children, who are among our most vulnerable.
    I have also heard from individual patients themselves, 
about how this crisis is affecting their health and--quite 
literally--their lives. I would like to share a story that I 
received from a constituent, which describes the severity of 
these shortages and how urgently we must work to address these 
issues.
    Sarah Batalka, a 29-year-old woman from Quakertown, was 
born with a mitochondrial disease. For 6 years now, she's 
needed help maintaining her blood levels of critical 
electrolytes, including magnesium and potassium. In addition to 
receiving them in pill form, she gets them through IV's that 
provide enormous doses of magnesium and potassium daily. These 
intravenous medications keep her alive. She cannot survive 
without them.
    Now I would like to read from a letter she wrote to me, so 
you can hear her own words. She writes:

          ``In April of this year, I got the worst possible 
        news: there is a drug shortage crisis nationwide. I was 
        told by my home infusion company that their supply of 
        IV magnesium sulfate, a key ingredient in my IV bags 
        and one without which I cannot survive, was dwindling 
        and that they only had enough to fill my IV bags for a 
        few more weeks. To give you some idea of the impact 
        this news had on me, please consider what it would feel 
        like to you if someone told you that there would only 
        be enough air supply left for you for 3 weeks of 
        breathing. I so depend on this medication for survival 
        that its unavailability would indeed be the same as you 
        having your air supply cutoff.
          My home infusion company explained to me the reasons 
        for the shortage. They told me that the FDA had to shut 
        down plants that manufacture IV magnesium sulfate due 
        to quality control issues: visible particulate matter 
        had been found in what is supposed to be a sterile, 
        injectable drug. I was also told that this has created 
        a nationwide shortage, affecting individuals like 
        myself who depend on IV nutrition and/or electrolytes . 
        . . cancer patients, expectant mothers . . . , dialysis 
        and kidney transplant patients, and others. IV 
        Magnesium sulfate is, especially in cases such as mine, 
        a life-sustaining drug needed by many different kinds 
        of patients with many different medical conditions. 
        There is no substitute for IV magnesium sulfate for us, 
        just as there is no substitute for oxygen, and you 
        can't survive without it. I was shocked to learn that 
        it was even possible for there to be a shortage of such 
        a drug in our country. From what I understand, this is 
        only one example of one drug on a list of hundreds of 
        life-sustaining medications that are currently 
        unavailable.''

    With little than 2 weeks supply left of her medication, 
twice this year Sarah has had to reach out to our office for 
help in finding her medication. Fortunately, in Sarah's case, 
her home infusion company was, at the last minute both times, 
able to purchase enough IV magnesium sulfate to keep her alive 
for the time being.
    But what will happen tomorrow? That is the question that is 
before us today and I pray that we can find a way to ensure 
that we move beyond this crisis.
    Chairman Harkin, I know our staffs have been working with 
others in the bipartisan work group deliberatively on this 
issue for many months now, and are working on recommendations 
for how the HELP Committee can help solve this crisis. I hope 
that we can find a way to move forward on the legislation--S. 
296, the Preserving Access to Lifesavings Medicines Act--that 
Senator Klobuchar and I introduced earlier this year, as I 
believe having an early warning system in place is fundamental 
to addressing these issues.
    I have spoken with others of you on the committee, 
including Senator Blumenthal, about this crisis and I know that 
many of you share this same commitment to moving this 
legislation forward, and identifying additional solutions to 
advance rapidly through the FDA reauthorization or otherwise.
    I look forward to working with you, and learning more from 
our witnesses today.

    The Chairman. Thank you, Senator Casey.
    Senator Hatch.

                       Statement of Senator Hatch

    Senator Hatch. Thank you, Mr. Chairman.
    Welcome to both of you. We appreciate the work you do and 
appreciate you being here.
    As I've been reviewing this, there are a number of reasons 
for these shortages that have been given. For instance, 
manufacturers have asserted that current shortages are 
principally due to manufacturing capacity being temporarily 
restricted, primarily due to FDA regulatory actions. Doctors, 
hospitals, and some patients have suggested that the problem is 
due to economic factors, focusing on the adequacy of payment 
rates for the products. And, of course, government-mandated 
rebates have lowered the payment levels for these products to a 
point where they say they're no longer cost effective for 
manufacturers to produce them, or at least make investments in 
updating manufacturing capacity to comply with current FDA 
supply requirements. Others say that the FDA has asserted that 
the problem principally lies with a recent increase in the 
number of generic drugs that has exceeded existing 
manufacturing capacity.
    Now, some outside experts point to the FDA's recent actions 
to review unapproved drugs, that were on the market prior to 
the current regulatory requirements, as being contributors to 
the shortage problem as well. I might say some analysts and 
stakeholders have blamed wholesalers for contributing to the 
shortage problem by rapidly increasing prices when drugs are in 
short supply, and I'm sure there are other arguments that are 
made as well.
    It's a complex set of problems.
    Let me just ask you this, Dr. Kweder. The agency announced 
yesterday an interim final rule that will expand to the current 
definition of sole manufacturers to increase the number of 
manufacturers that are required to notify FDA about a 
discontinuation of product. Now, does the Executive order 
issued by the President and the interim final rule published by 
the agency, does that negate congressional action to address 
shortages, or is more required to mitigate current and future 
shortages?
    Dr. Kweder. Senator, the interim final rule really only 
clarifies and expands what we have as existing authority. That 
is very, very narrow. It really speaks to notifying FDA of a 
disruption or discontinuance of any type of a product where a 
company is the sole supplier of that product. The majority of 
shortages and potential shortages that we are trying to cope 
with don't fall into that category. So it really is not the 
sole answer. We think this will help, but it is not the sole 
answer. We can't do this on our own.
    Senator Hatch. OK. Let me just say it's apparent that we 
have to do something here. The question is what. I listened to 
Senator Blumenthal's suggestion. It seems to me that would take 
away the desire to even be in the drug delivery business, and 
it would certainly put even more fiscal controls.
    On the other hand, we've got to do something to maybe make 
sure that these drugs--for instance, it's said that 80 percent 
of the shortage really is in the area of sterile injectables, 
and these are really important for people with very serious 
maladies. And part of the problem, they claim, is the reduction 
in price for these products, and I'm not sure that's a good 
argument. But I'd like to get your opinion on that, if either 
one of you can comment.
    Ms. Glied. I think our analysis suggests that it's not a 
problem of a reduction in price, that prices are actually 
rising for those drugs that are in shortage, and that prices 
paid to manufacturers, that's really not been a source of this 
problem. We look at information from the manufacturers, as well 
as from public sources, and those sources seem to suggest that 
these manufacturers see a robust market ahead of them and that 
price is not the issue.
    Senator Hatch. Let me just ask one other question. For 
example, irinotecan, lost patent protection in February 2008, 
as I understand it. At that time, nine generic competitors were 
competing in the market. The Federal reimbursement in Medicare 
in the second quarter of 2008 was $126.24 per dose.
    Today there are only three manufacturers left in the 
market, down from a high of 15 manufacturers. Reimbursement by 
Medicaid is now $4.66 per dose. How can we increase the 
manufacturers in the market when we've reduced the 
reimbursement over 90 percent? And I understand the desire to 
reduce the reimbursement cost, but it seems kind of ridiculous 
to me.
    Ms. Glied. I just want to point out that that reimbursement 
cost, whatever it may be, is not the price that's paid to the 
manufacturers. That's a reimbursement that's paid to providers 
and hospitals, but they get their drugs through contracts that 
group purchasing organizations negotiate with manufacturers, 
and those contracts have only one price in them, regardless of 
who the payer at the end is. The fact that the price is 
changing, the fact that the price at the hospital or provider 
is changing is really disconnected from the price received by 
the manufacturers.
    I would point out that the other thing to note is that when 
a drug moves from branded to generic, it takes a while until 
the information that Medicaid and Medicare get on prices 
adjusts. We know that when prices move from branded to generic, 
their price falls a lot, and that's because of the patent 
expiration. That would not be reflected contemporaneously. So 
the price, that high price that you're seeing is the price that 
still reflects when the drug was on brand, not the price that 
existed when the drug went off patent.
    A big piece of that, a big chunk of the reductions in 
prices is the fact that patent expirations are happening and 
drugs are moving from the branded to the generic market.
    Senator Hatch. What is the price on that for the 
manufacturer today?
    Ms. Glied. I couldn't tell you, and I'm not even sure that 
that would be publicly available knowledge. Those are private 
contracts.
    Senator Hatch. All right. Maybe that's not the way we 
should look at it, then.
    My time is up, Mr. Chairman. I didn't mean to go over.
    The Chairman. That's fine. Thank you, Senator Hatch.
    Senator Hagan.

                       Statement of Senator Hagan

    Senator Hagan. Thank you, Mr. Chairman, and thank you and 
Ranking Member Enzi for holding this hearing today.
    I'm concerned, obviously, about this issue, and I've got a 
particularly heart-wrenching story I wanted to share, Mr. 
Chairman.
    A woman, Ms. Sheets, had recurrent breast cancer, and she 
lived in the Winston-Salem area of North Carolina. The second 
time her breast cancer returned, it also affected her liver. 
And she was on doxo, and her doctor said that when a patient is 
being treated for metastatic breast cancer and is improving or 
stable, they continue the same therapy until they progress, 
which for first-line therapy could be a year. And when doxo 
became in short supply, her doctor waited to see if it would 
become available rather than switching her course of treatment.
    But after 1 month, this woman had to be started on another 
type of treatment, and for her, a less-effective drug, and 
sadly, her breast cancer metastasized to her brain very soon 
after the initiation of that regimen, and then she died within 
3 weeks of that diagnosis. This is obviously a very tragic 
story, and we continually hear from cancer patients like this 
across the State. And so I'm looking forward to seeing what we 
can do about this issue.
    Dr. Kweder, I'm very concerned about the drug shortages 
that are currently affecting the way we treat patients in our 
country, just like Ms. Sheets. And the President's recent 
Executive order directed the FDA to expedite its regulatory 
reviews, including reviews of new drug suppliers, manufacturing 
sites, and manufacturing changes whenever it determines that 
expedited review would help to avoid or mitigate existing or 
potential drug shortages.
    However, I am aware that applications for generic 
injectable drugs currently on the drug shortage list have been 
pending with the agency for more than 2\1/2\ years.
    What is FDA doing currently to expedite review of 
applications for drugs that are currently on the drug shortage 
list?
    Dr. Kweder. Senator, we are absolutely expediting those. 
What we do is when we see a potential drug shortage--we don't 
wait until there's a shortage. When we have information about a 
circumstance in a company that might lead to a drug shortage, 
we look at our queue, which is long, of generic applications 
for all kinds of things, and we go in and we try to find any 
application that we might expedite that might address that 
particular circumstance.
    Sometimes the companies come to us and they tell us, ``You 
know, I've had this application pending. It wasn't critical 
before, but it appears that it is now.'' And we will go right 
in and pull it out of the queue and address it and can turn 
things around in a matter of weeks to months and get it done.
    Senator Hagan. I've specifically heard from a company that 
is on the list for 2\1/2\ years for this generic injectable.
    Dr. Kweder. And that may well be the case, but they may be 
one of five producers of a generic injectable and not one that 
we would necessarily see as a high priority to pull out.
    Senator Hagan. But the drug is on the drug shortage list.
    Dr. Kweder. The drug is on the drug shortage list? If it is 
on our list of potential drug shortages, problems that might 
lead to shortage, we would pull that. And if there is a company 
that's in that circumstance and we've missed it, we need to 
know about that.
    Senator Hagan. OK. We will definitely get back to you on 
that one.
    Dr. Kweder, how has the FDA prioritized addressing the drug 
shortage problem as part of its agency's goals? And what do we 
need to do, what does the FDA need to do in order to make this 
a priority? For example, more authorities? More resources? Et 
cetera.
    Dr. Kweder. We have done a great deal since the Executive 
order came out at the end of October. We've doubled, more than 
doubled the size of our Drug Shortage Program that does all the 
coordinating related to this. I'm happy to say we have--
    Senator Hagan. You have more than doubled--
    Dr. Kweder. The size. As of October 31, we had about four-
and-a-half people on it. We now have eight and are expecting 
three more in January coming on board, I'm happy to say. A 
number of commissioned officers are joining this program. The 
Administration also has announced its support for the 
bipartisan legislation, some of which we heard about from 
Senator Klobuchar this morning, that would give us more 
authority to require companies to notify us early if they have 
any problem with manufacturing or otherwise that could result 
in a drug shortage. That is where we can make a difference.
    In the long run, Dr. Glied is right, better production 
facilities that are more reliable and can produce high-quality 
products consistently is what will really address the big 
picture. But in the interim, FDA knowing about these potential 
situations, companies coming to us allows us to work with them, 
prioritize the work in a way that allows us to intervene and 
prevent the shortage in the first place.
    Senator Hagan. How many manufacturers have actually come 
forward to notify you of coming shortages?
    Dr. Kweder. We have had, since October 31 and the Executive 
order and our other activities, we have had 61 notifications 
mostly from companies, some from hospitals and other things, 
but 61. The important thing is that that's over the course of 
about a month to 6 weeks. Our usual rate is about 10 
notifications per month. And we know that companies have been 
reluctant to come to us. They don't want to draw attention to 
themselves. But we are seeing a real move in the industry. The 
Generic Drug Manufacturing Organization is helping get the word 
out. We're trying to work together to solve these problems 
before they occur.
    Senator Hagan. Thank you, Mr. Chairman, and we will 
definitely be following up with you. Thank you.
    Dr. Kweder. Thank you.
    The Chairman. Thank you, Senator Hagan.
    Senator Mikulski.

                     Statement of Senator Mikulski

    Senator Mikulski. Mr. Chairman, I know the hour is late. 
This has been a very needed conversation and I look forward to 
reviewing the testimony. I suggest we move to the next panel. I 
ask that my opening statement be included in the record.
    There is such compelling interest in this issue in Maryland 
from iconic institutions like Hopkins and the University of 
Maryland, both research and clinical practice, and to all those 
wonderful doctors that just want to make sure their patients 
have what they need when they need it.
    So let's move on with the panel and move on with an action 
plan.
    [The prepared statement of Senator Mikulski follows:]

                 Prepared Statement of Senator Mikulski

    Thank you Chairman Harkin and Ranking Member Enzi for 
having today's hearing on prescription drug shortages. This is 
a local, State and national problem that, unfortunately, 
affects all of us.
    I am glad to be a member of the bipartisan Drug Shortage 
Working Group, where our job is to ensure that we have the 
right legislative framework with the right enforcement teeth in 
place to ensure that our Nation's patients and health care 
providers are able to access the prescription drugs they depend 
upon.
    I have heard from Maryland hospitals, doctors, nurses and 
patients that drug shortages are a serious problem with serious 
consequences.
    Maryland hospitals are seeing shortages of over 100 drugs. 
These shortages affect patient safety and patient care. There 
are poor patient outcomes due to delayed treatment. Doctors and 
nurses are forced to use drugs that they aren't familiar with, 
which can lead to medical errors.
    Maryland hospitals--being the innovators they always are--
have implemented some regional solutions to manage the problem. 
The University of Maryland and Johns Hopkins University are 
working with the Veterans Administration to open up their 
pharmacies to each other to manage shortages and minimize harm 
to patients.
    Like many complex issues, our Nation's drug shortage 
problem has many root causes.
    There is poor product quality. Manufacturers can't--or 
aren't--complying with Food and Drug Administration (FDA) good 
manufacturing practices. The FDA has more advanced science and 
testing capabilities and are catching more quality problems 
than in the past.
    Manufacturers can't access raw materials.
    Business and market forces are affecting drug availability. 
Manufacturers close plants when problems arise and stop 
producing drugs that aren't profitable. Some drug companies 
have expanded the number of products they manufacture without a 
corresponding expansion in production capacity.
    Wholesalers and health care providers aren't maintaining a 
large inventory of drugs to carry them through a supply 
disruption.
    The FDA lacks authority to require notification from 
manufacturers when a plant shuts down, which could lead to a 
drug shortage. Patients and hospitals are then caught off-guard 
and get little or no notice that a shortage is imminent. This 
leaves hospitals and patients with no time to prepare and 
leaves the FDA with no time to find a solution, such as working 
with another manufacturer to increase production of the drug in 
shortage.
    Bad actors in ``grey markets'' are selling fake, expired or 
illegally imported prescriptions. Some are hording drugs and 
hiking up the prices--exacerbating the problem.
    President Obama issued an Executive order on October 31 to 
immediately take action to reduce shortages; but we can and 
must do more.
    I have heard from stakeholders about potential solutions 
including: penalties for price gouging; requiring manufacturers 
to give notice when there is a manufacturing issue that could 
cause a shortage, which is what Senator Klobuchar's bill would 
do; improve coordination and consultation among FDA review, 
inspection and compliance staff to get more manufacturers to 
enter the market and get manufacturing lines re-inspected and 
running again in order to reduce the likelihood of shortages.
    I look forward to hearing from the witnesses about their 
recommendations and will fight to include the best solutions in 
the Prescription Drug User Fee Act.

    The Chairman. OK. Thank you very much, Senator Mikulski.
    I thank the panel. You've been very, very excellent 
witnesses. Thank you very much for your work and for being 
here.
    Now we'll call our next panel, Dr. Marcia Crosse, Mr. 
Murray Aitken, and Mr. Ralph Neas.
    Dr. Marcia Crosse, Director of Health Care for the 
Government Accountability Office. Dr. Crosse has been at GAO 
since 1983, has extensive experience evaluating areas such as 
biomedical research, medical product safety, and pharmaceutical 
regulations. Most recently she led the team that issued today's 
GAO report on drug shortages.
    Murray Aitken is executive director of the IMS Institute 
for Health Care Informatics. In this position, Mr. Aitken 
collaborates with other experts in the public and private 
sectors to provide information services and analytics for the 
health care industry. He led the team at IMS that published a 
report in November entitled ``Drug Shortages: A Close Look at 
Products, Suppliers, and Volume Volatility.''
    Next we have Mr. Ralph Neas, president and chief executive 
officer of the Generic Pharmaceutical Association. Mr. Neas has 
spent his career focusing on civil rights and health issues, 
having previously served as the executive director of the 
Leadership Conference on Civil Rights, and most recently as the 
CEO of the National Coalition on Health Care.
    We thank all of you for being here.
    I'm going to yield to Senator Casey for purposes of 
introducing our final witness, Dr. Maris.
    Senator Casey. Thank you, Mr. Chairman.
    Dr. Maris, welcome. Welcome to the whole panel. I haven't 
had a chance to personally say hello to Dr. Maris today because 
I can't reach that far, but we'll say hello after the hearing.
    Dr. Maris is chief of the Division of Oncology at 
Children's Hospital of Philadelphia and the director of the 
Center for Childhood Cancer Research. He's also the director of 
the Pediatric Oncology Program at the Abramson Cancer Center at 
the University of Pennsylvania. He's nationally and 
internationally recognized for his work in translating research 
about childhood cancers from the labs to the patients. His team 
at Children's Hospital has been able to identify the main genes 
associated with neuroblastoma, a cancer that can be extremely 
aggressive. In the quest for a cure, they have moved some of 
these discoveries toward new therapies, a number of which are 
now in clinical trials.
    Dr. Maris, we're grateful for your work, and thank you for 
being here today with us.
    The Chairman. Thank you very much, and thank you all for 
being here. Your statements will be made a part of the record 
in their entirety. We'll go from left to right. If you could 
limit your opening statements to 5 minutes, we'd certainly 
appreciate that.
    Dr. Crosse, welcome and please proceed.

 STATEMENT OF MARCIA G. CROSSE, Ph.D., DIRECTOR, HEALTH CARE, 
        GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC

    Ms. Crosse. Thank you, Mr. Chairman. Mr. Chairman and 
members of the committee, I'm pleased to be here today as you 
examine prescription drug shortages. As you stated, Mr. 
Chairman, today you're releasing GAO's report on FDA's handling 
of drug shortages prepared in response to a request from you, 
Senator Casey, and Senator Blumenthal. I will discuss some of 
our findings from that report.
    As we've heard, the number of drug shortages has grown 
substantially, more than tripling in the last 5 years, and drug 
shortages are currently at record levels. Over half of the 
critical shortages involve generic injectable drugs with 
certain therapeutic classes such as anesthetic, oncology, and 
anti-infective drugs among those most often in short supply. 
Our review of specific shortages shows that the majority were 
caused by manufacturing problems which are particularly likely 
to occur with sterile injectable drugs.
    My remarks today will focus specifically on what FDA can 
and cannot do to respond to drug shortages, and how the agency 
has responded when drug shortages have occurred. We've heard 
from FDA about some of the things that they can do, and I'll 
come back to that. But what is it that FDA cannot do?
    FDA cannot require manufacturers to report actual or 
potential shortages to the agency or the public, or require 
manufacturers to take certain actions to prevent, alleviate, or 
resolve shortages. FDA cannot force manufacturers to make a 
drug or to increase the production of a drug that's in short 
supply. It cannot control the distribution of drugs. It cannot 
prevent drugs from being sold into the gray market, and it 
cannot control prices. These distribution concerns have 
frequently been highlighted in recent discussions of shortages, 
and hospitals are being offered gray market drugs to fill 
shortages at prices sometimes hundreds of times above normal.
    What is it that FDA can do? Because FDA usually doesn't 
know about a shortage until it is well under way, the agency's 
approach to managing drug shortages is predominantly reactive. 
As FDA testified, the agency takes multiple steps to respond to 
drug shortages such as providing assistance to manufacturers to 
resolve quality problems.
    In addition, FDA encourages other manufacturers to increase 
production. It allows some products to continue to be marketed 
despite labeling or quality problems, and it has occasionally 
permitted the import of foreign versions of drugs.
    FDA may also expedite its review of relevant drug 
applications. The agency currently has a backlog of over 8,000 
generic drug applications and told us that to try to address 
shortages, it expedited the review of hundreds of applications. 
But FDA was unable to tell us whether any of the expedited 
reviews were completed in time to help resolve a shortage.
    Of particular importance, when FDA is informed of the 
possibility of a shortage in advance, the agency has 
increasingly been able to prevent potential drug shortages from 
occurring. By taking the same kinds of actions the agency uses 
to respond to a shortage, FDA has prevented shortages of the 
majority of drugs where the agency learned of potential supply 
disruptions in advance.
    Beyond this, however, there are some things that the agency 
has not been doing. FDA's ability to protect public health has 
been limited by management challenges that weaken its ability 
to respond to drug shortages. Most importantly, FDA has not 
systematically maintained data on drug shortages. Without such 
data, the agency has been unable to monitor trends and enhance 
its ability to address the causes of drug shortages.
    Many of these drugs have repeatedly been in short supply 
over the last decade, but FDA has not been performing routine 
analyses to understand patterns or examine root causes. Without 
a systematic method to store, track, and share data on drug 
shortages, the agency cannot ensure that it responds to 
potential and current shortages in a timely and coordinated 
manner.
    In addition, FDA has consistently staffed its Drug Shortage 
Program with a small number of employees. Even while the number 
of drug shortages tripled, just three staff were handling this 
work, and FDA only recently moved to add resources to this 
program.
    Finally, while the agency identified drug availability as a 
strategic objective to protect public health, this objective 
was focused solely on processes to bring new drugs to market. 
The agency had no strategic focus on maintaining the supply of 
drugs already on the market.
    In closing, in our report we made several recommendations 
to FDA to strengthen its ability to respond to drug shortages, 
including assessing the resources allocated to the Drug 
Shortage Program and developing an information system on 
shortages. The agency has outlined actions it plans to take 
that are consistent with our recommendations.
    Our report also includes a matter for congressional 
consideration. We believe that Congress should consider 
establishing a requirement for manufacturers to report to FDA 
any changes that could affect the supply of their drugs.
    Mr. Chairman, this concludes my prepared remarks. I'd be 
happy to answer any questions that you or other members of the 
committee may have.
    [The prepared statement of Ms. Crosse follows:]
             Prepared Statement of Marcia G. Crosse, Ph.D.
                                summary
                         why gao did this study
    In recent years, nationwide shortages of prescription drugs have 
increased, preventing patients from accessing medications essential to 
their care. The Food and Drug Administration (FDA), an agency within 
the Department of Health and Human Services (HHS), established a Drug 
Shortage Program with a mission of helping to prevent, alleviate, and 
resolve shortages. FDA receives information about shortages from 
manufacturers, though this reporting is generally voluntary, as well as 
from the American Society of Health-System Pharmacists (ASHP). ASHP 
tracks nationwide shortages for its members through a partnership with 
the University of Utah Drug Information Service (UUDIS).
    GAO was asked to review trends in shortages and examine FDA's 
response. In this report, GAO:

    (1) reviews trends in drug shortages,
    (2) describes FDA's response, and
    (3) evaluates FDA's ability to protect public health through its 
response to drug shortages. GAO analyzed UUDIS data, interviewed 
officials from FDA, health care professional associations, and 
industry, and also examined relevant statutes, regulations, 
information, and documents.
                          what gao recommends
    Congress should consider establishing a requirement for 
manufacturers to report to FDA any changes that could affect the supply 
of their drugs. In addition, FDA should enhance its ability to respond 
to drug shortages, for example, by developing an information system to 
manage data about shortages. HHS outlined actions it plans to take that 
are consistent with GAO's recommendations.
    Drug Shortages--FDA's Ability to Respond Should Be Strengthened
                             what gao found
    The number of drug shortages has grown substantially since 2006. In 
total, 1,190 shortages were reported from January 1, 2001, through June 
20, 2011, according to UUDIS data. From 2006 through 2010, the number 
of drug shortages increased each year. A record number of shortages 
were reported in 2010, and 2011 is on pace to surpass 2010's record. Of 
the shortages, 64 percent involved drugs that were in short supply more 
than once. On average, shortages lasted 286 days (over 9 months). Over 
half of shortages reported from January 1, 2009, through June 20, 2011, 
that UUDIS identified as critical--because, for example, alternative 
drugs were not available--involved generic injectable drugs. Certain 
therapeutic classes (such as anesthetic, oncology, and anti-infective 
drugs) were among those most often in short supply.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    FDA responds to drug shortages by taking actions to address the 
underlying causes and to enhance product availability, for example by 
providing assistance to manufacturers to resolve manufacturing or 
quality problems that can result in a shortage. When informed of the 
possibility of a shortage in advance, FDA has increasingly been able to 
prevent potential drug shortages from occurring. FDA prevented 50 
potential shortages during the first half of 2011. As part of its 
response, FDA provides general information about drug shortages to the 
public via its Web site.
    FDA is constrained in its ability to protect public health from 
drug shortages due to its lack of authority to require manufacturers to 
report actual or potential shortages to the agency or the public, or to 
require manufacturers to take certain actions to prevent, alleviate, or 
resolve shortages. As a result, the agency's approach to managing drug 
shortages is predominately reactive. FDA's ability to protect public 
health is also constrained by management challenges that weaken its 
ability to respond to drug shortages. For example, FDA does not 
systematically maintain data on drug shortages, without which it is 
unable to monitor trends and enhance its ability to address the causes 
of drug shortages. In addition, FDA has provided limited resources to 
manage its response to drug shortages and lacks related performance 
measures and priorities.
                                 ______
                                 
    Mr. Chairman and members of the committee, I am pleased to be here 
today to discuss the Food and Drug Administration's (FDA) response to 
prescription drug shortages. According to FDA, a record number of drugs 
were in short supply in 2010, and the number of drug shortages has 
continued to grow throughout 2011. A variety of factors can trigger 
drug shortages, such as disruptions in the supply of the active 
pharmaceutical ingredients required to manufacture the drug, 
manufacturing problems, manufacturers' business decisions, and 
increased demand for products. Drug shortages directly threaten public 
health by preventing patients from accessing medications that are 
essential to their care. During shortages, physicians may have to 
ration their supplies, delay treatments, or use alternative medications 
that may be less effective for the condition, carry unwanted side 
effects, or cost more. Consistent with its mission of protecting the 
public health, FDA, an agency within the Department of Health and Human 
Services (HHS), established a Drug Shortage Program to help prevent, 
alleviate, and resolve shortages.
    Drug shortages may be reported to FDA by manufacturers, health 
professionals, or the public. FDA also obtains information from the 
American Society of Health-System Pharmacists (ASHP), which tracks and 
makes information publicly available about nationwide drug shortages 
through a partnership with the University of Utah Drug Information 
Service (UUDIS).\1\
---------------------------------------------------------------------------
    \1\ ASHP posts information about drug shortages on its Web site. 
See http://www.ashp.org/menu/PracticePolicy/ResourceCenters/
DrugShortages.aspx.
---------------------------------------------------------------------------
    My statement will highlight key findings from our November 2011 
report, which is being released today, that reviews trends in 
prescription drug shortages and FDA's response.\2\ In that report, we 
(1) reviewed trends in prescription drug shortages that occurred from 
January 2001 through June 2011, (2) identified the reported causes of 
selected drug shortages that occurred from January 2009 through June 
2011, (3) described FDA's response to drug shortages, and (4) evaluated 
the extent to which FDA is able to protect the public health through 
its response to drug shortages.
---------------------------------------------------------------------------
    \2\ See GAO, Drug Shortages: FDA's Ability to Respond Should be 
Strengthened, GAO-12-116 (Washington, DC: Nov. 21, 2011).
---------------------------------------------------------------------------
    To identify trends in drug shortages, we analyzed UUDIS data on the 
number and duration of prescription drug shortages reported to ASHP 
from January 2001 through June 20, 2011. We examined these data because 
FDA did not have a database containing information on drug shortages 
for the time period we reviewed, and UUDIS is generally regarded as the 
most comprehensive and reliable source of such information. Using these 
data, we identified the number of drugs that had been in short supply 
on multiple occasions and the collective duration of these shortages. 
Using Red Book data, we examined the characteristics of 269 critical 
drug shortages that were identified during a shorter time period, 
January 1, 2009, through June 20, 2011.\3\
---------------------------------------------------------------------------
    \3\ Red Book is a compendium published by Thomson Reuters that 
includes information about the characteristics of drug products. UUDIS 
recognized these shortages as critical because alternative medications 
were unavailable, the shortages affected multiple manufacturers, or the 
shortages were widely reported; because the shortages were determined 
to be critical, they were posted to ASHP's Web site.
---------------------------------------------------------------------------
    To identify the reported causes of selected drug shortages that 
occurred from January 2009 through June 2011, we focused our analysis 
on a nongeneralizable sample of 15 drug shortages that have had a 
significant impact on public health. The drugs involved in these 
shortages--all sterile injectables--are from three therapeutic classes: 
anesthesia, oncology, and anti-infective drugs.\4\ We asked FDA 
officials to provide information on the causes of these 15 drug 
shortages, as reported to the agency by manufacturers. For additional 
information on the causes of shortages, we obtained information from 
four manufacturers of sterile injectable drugs--APP Pharmaceuticals, 
Bedford Laboratories, Hospira, and Teva Pharmaceuticals. All of these 
manufacturers produce drugs that recently were in short supply, and all 
of the 15 drug shortages we selected for review involved drugs that 
were manufactured by one or more of these manufacturers.
---------------------------------------------------------------------------
    \4\ Specifically, we reviewed information about shortages for five 
anesthesia drugs (epinephrine, neostigmine, propofol, thiopental, and 
succinylcholine), five oncology drugs (cisplatin, cytarabine, 
doxorubicin, etoposide, and vincristine) and five anti-infective drugs 
(acyclovir, amikacin, cefotetan, clindamycin, and sulfamethoxazole-
trimethoprim). Most of these drugs have been available in generic form 
for over 15 years.
---------------------------------------------------------------------------
    To describe FDA's response to drug shortages, we interviewed FDA 
officials and reviewed agency documents, including policies and 
procedures. To describe how FDA responded to the 15 selected drug 
shortages we reviewed in detail, we examined information the agency 
provided about its response to these shortages. We also analyzed FDA 
information on potential drug shortages the agency prevented from 
January 2010 through June 2011.
    To evaluate the extent to which FDA is able to protect public 
health through its response to drug shortages, we analyzed FDA's 
authority under the Federal Food, Drug, and Cosmetic Act, and reviewed 
relevant FDA regulations, policies, procedures, and documents. In 
addition, we evaluated FDA's approach to managing its response to drug 
shortages using standards for internal control--including those for 
information and communications, monitoring, and risk assessment.\5\ We 
also interviewed a variety of stakeholders--including drug 
manufacturers, health professional associations, and others involved in 
drug production and the drug supply chain--to obtain information about 
FDA's response to drug shortages. Our work was performed in accordance 
with generally accepted government auditing standards.
---------------------------------------------------------------------------
    \5\ See GAO, Standards for Internal Control in the Federal 
Government, GAO/AIMD-00-21.3.1 (Washington, DC: November 1999).
---------------------------------------------------------------------------
    In brief, we found that the number of drug shortages has grown 
substantially in recent years, and FDA is constrained in its ability to 
protect the public health from the impact of these shortages.

      The number of drug shortages has grown substantially since 2006, 
and many shortages involved generic injectable drugs. In total, 1,190 
shortages were reported from January 1, 2001, through June 20, 2011, 
according to UUDIS data. From 2006 through 2010, the number of drug 
shortages increased each year and grew by more than 200 percent over 
this period. A record number of shortages (196) were reported in 2010, 
and 2011 is on pace to surpass 2010's record, with 146 shortages 
reported through June 20, 2011. Over half (64 percent) of the 1,190 
shortages represent 283 drugs that were in short supply more than once. 
On average, these 283 drugs were each in short supply between 2 and 8 
times during this period, with an average of 2.7 times per drug. While 
the duration of all reported shortages varied considerably, most 
shortages lasted 1 year or less. On average, shortages lasted 286 days 
(over 9 months). Over half of shortages reported from January 1, 2009, 
through June 20, 2011, that UUDIS identified as critical--because, for 
example, alternative drugs were not available--involved generic 
injectable drugs. Certain therapeutic classes (such as anesthetic, 
oncology, and anti-infective drugs) were among those most often in 
short supply.
      The drug shortages we reviewed in detail were generally caused by 
manufacturing problems and exacerbated by multiple difficulties. Of the 
drug shortages we reviewed in detail, 12 of the 15 were primarily 
caused by manufacturing problems, including those that resulted in 
manufacturing shutdowns, according to information provided by FDA and 
by manufacturers. For example, one manufacturer shut down a facility 
that produces sterile injectable drugs in order to improve the 
facility's manufacturing capabilities. While the manufacturer expected 
that the upgrade would take 3 months, it instead took 1 year to 
complete, and as a result, multiple drugs that were produced at this 
facility went into short supply. The remaining 3 shortages we reviewed 
were reportedly caused by disruptions in the supply of active 
pharmaceutical ingredients. Officials from FDA and manufacturers 
explained that sterile injectable drugs are complex to make, and as 
such, can be prone to manufacturing and quality problems. In addition, 
certain types of sterile injectable drugs, such as anti-infective and 
oncology drugs, can be particularly challenging to manufacture. FDA 
also pointed out that sterile injectable drugs are being made by a 
decreasing number of aging facilities, which may contribute to the 
recent increase in manufacturing problems. In addition to the initial 
problems that caused the shortages, over half of the shortages we 
reviewed (8 of 15) were subsequently exacerbated by multiple other 
difficulties that arose after the shortages began. These eight 
shortages were each affected by an average of four distinct 
difficulties that occurred in addition to the primary cause of the 
shortage and generally affected multiple manufacturers. During these 
shortages, multiple manufacturers sometimes experienced the same 
exacerbating issues once a shortage was already ongoing. For example, 9 
of the 15 shortages we reviewed were extended as a result of 
manufacturing problems that occurred in addition to the shortages' 
primary causes. It is also important to recognize that some drugs may 
only be produced by a few manufacturers. The drugs involved in the 15 
shortages we reviewed were produced by an average of three 
manufacturers at the time the drug went into short supply. According to 
officials from FDA and industry officials, when only a few 
manufacturers make a drug and one cannot maintain production, it can be 
difficult for the other manufacturers to substantially increase 
production to ensure that demand for a drug is met--even in the absence 
of any other problems. Officials from one manufacturer described recent 
shortage situations as a perfect storm of several manufacturers 
coincidentally experiencing manufacturing problems all at the same 
time.
     FDA responds to known drug shortages by taking actions to 
address their underlying causes and to enhance product availability. 
FDA officials explained that they respond to all of the shortages of 
which the agency becomes aware, and they determine how to address each 
shortage based on its cause and the public health risk associated with 
the shortage. For example, the agency may provide assistance to 
manufacturers to resolve manufacturing or quality problems that can 
result in a shortage. Our review of FDA's response to 15 shortages of 
sterile injectable drugs showed that FDA typically used 2 or more types 
of actions to respond to each shortage, and for 8 shortages, the agency 
responded with 4 or more types of actions. FDA most frequently offered 
assistance to manufacturers to prevent, alleviate, or resolve the 
shortage, or notified other manufacturers to expect increased demand or 
encouraged them to increase production. FDA has demonstrated that it 
can prevent the majority of shortages from occurring when it learns of 
potential supply disruptions in advance. FDA prevented 50 potential 
shortages during the first half of 2011--about 1.5 times the number of 
potential drug shortages (35) prevented during all of 2010. To prevent 
these potential shortages, FDA took some of the same types of actions 
it uses to alleviate and resolve shortages. As part of its response to 
drug shortages, FDA communicates information about shortages to the 
public via its Web site, which lists both current and resolved 
shortages.\6\
---------------------------------------------------------------------------
    \6\ See http://www.fda.gov/Drugs/DrugSafety/DrugShortages/
default.htm.
---------------------------------------------------------------------------
      FDA is constrained in its ability to protect public 
health from drug shortages. Specifically, FDA is constrained by its 
lack of authority to require manufacturers to provide the agency and 
the public with information about shortages, or require that 
manufacturers take certain actions to prevent, alleviate, or resolve 
shortages. FDA's sole authority related to manufacturers' reporting of 
drug shortages pertains to the discontinuation of approved drugs that 
are life-supporting, life-sustaining, or for use in the prevention of a 
debilitating disease or condition, when such drugs are produced by only 
one manufacturer.\7\ In such instances, companies are required to 
provide FDA with at least 6 months notice of discontinuations. However, 
such discontinuations have not been the primary cause of most recent 
drug shortages. As a result of these constraints, the agency's approach 
to managing drug shortages is predominately reactive. While FDA has 
encouraged manufacturers to report supply disruptions to the agency, 
according to agency officials, less than half of all shortages are 
reported to the agency by manufacturers. Instead, FDA is most often 
notified by ASHP, health care providers, or consumers when they are 
unable to purchase a drug--a point at which the shortage is already 
affecting public health. FDA's ability to protect public health is also 
constrained by management challenges that weaken its ability to respond 
to drug shortages. Specifically, FDA does not maintain data on drug 
shortages, such as their causes and the agency's response. Without such 
data, FDA is unable to systematically monitor trends and enhance its 
ability to address the causes of drug shortages. In addition, despite 
the increase in the number of drug shortages reported in recent years, 
FDA has not identified drug shortages as an area of strategic 
importance for the agency. It has consistently staffed its Drug 
Shortage Program with a small number of employees. While FDA has 
recognized the significant public health consequences that can result 
from drug shortages, the agency has not developed a set of results-
oriented performance metrics related to drug shortages, and has not 
identified drug shortages as an area of strategic importance for the 
agency. Without such management tools, FDA may be unable to effectively 
evaluate its work and improve its ability to protect the public health.
---------------------------------------------------------------------------
    \7\ See 21 U.S.C.  356c; 21 CFR  314.81(b)(3)(iii) (2011). FDA 
does not have the authority to enforce this requirement, for example, 
by seeking civil monetary penalties. To the maximum extent possible, 
FDA is to distribute information on the discontinuance of these 
products to appropriate physician and patient organizations.

    In conclusion, the number of drug shortages has substantially 
increased in recent years--including those for life-saving medications 
such as oncology drugs--a situation that has jeopardized the public 
health. While FDA may not always be able to prevent shortages from 
occurring, the agency's response to drug shortages is constrained by 
its lack of authority to require manufacturers to report potential or 
current shortages to the agency. FDA has demonstrated that when it 
learns of shortages in advance, it can prevent the majority of such 
shortages from occurring.
    However, it does not currently have the authority to require 
manufacturers to provide it with information about potential or current 
shortages, and therefore it can only prevent the shortages that it 
becomes aware of through voluntary reporting. FDA's ability to protect 
the public health is also constrained by its own management challenges. 
The agency has not elevated the priority it places on its response to 
drug shortages, despite the rapid escalation of these shortages. Not 
only have its resources not kept pace with this escalation, the agency 
has not developed the metrics to manage this growing public health 
problem. Without data and results-oriented performance measures, FDA 
cannot systematically monitor drug shortages and their causes, nor can 
it adequately track or assess its own success in preventing or 
mitigating shortages. Although FDA recognizes the serious threat these 
shortages pose, we believe the agency can and must do more to protect 
the public health.
    Our report includes a matter for congressional consideration that 
would establish a requirement for manufacturers to report to FDA any 
changes that could affect the supply of their drugs. In addition, our 
report recommends that FDA take steps to strengthen its ability to 
respond to drug shortages by: (1) assessing the resources allocated to 
the Drug Shortage Program; (2) developing an information system to 
enable the Drug Shortage Program to manage its daily workload in a 
systematic manner, track data about drug shortages--including their 
causes and FDA's response--and share information across FDA offices 
regarding drugs that are in short supply; (3) ensuring that FDA's 
strategic plan articulates goals and priorities for maintaining the 
availability of all medically necessary drugs; and (4) developing 
results-oriented performance metrics to assess and quantify the 
implementation of the agency's goals and FDA's response to drug 
shortages.
    In commenting on a draft of the report upon which this testimony is 
based, HHS stated that it supports legislation that would require 
manufacturers to report potential or actual supply disruptions to FDA. 
In addition, HHS outlined actions it plans to take that are consistent 
with our recommendations.
    Mr. Chairman, this concludes my statement. I would be pleased to 
respond to any questions you or other members of the committee may 
have.

    The Chairman. Thank you, Dr. Crosse.
    Mr. Aitken, please proceed.

 STATEMENT OF MURRAY AITKEN, SENIOR VICE PRESIDENT, HEALTHCARE 
                  INSIGHT, IMS, PARSIPPANY, NJ

    Mr. Aitken. Mr. Chairman, members of the committee, thank 
you for this opportunity to appear before you today on this 
important topic. Disruptions in clinical care caused by drug 
shortages are of growing concern among patients, clinicians, 
suppliers and manufacturers, as well as policymakers. We 
applaud the efforts to date of the FDA, ASPE, and ASHP, and 
this committee in working to understand the problem.
    We believe it's critical to bring the best available 
information to the discussion of the underlying causes and 
potential mechanisms to prevent shortages or alleviate their 
effects. That's why the IMS Institute for Healthcare 
Informatics has undertaken an independent study without 
industry or government sponsorship, using our proprietary data 
to look at the actual supply of those drugs on the shortage 
lists maintained by the FDA and the American Society of Health 
System Pharmacists.
    Among the findings from our analysis and included in our 
report are three important points. First, the drug shortage 
problem is highly concentrated in a relatively small number of 
products that are mostly generic and mostly injectables. We see 
that of the 168 products in our dataset, 83 percent are 
generics, 82 percent are injectables, and they are almost 
entirely used in hospital or clinic settings for inpatient or 
outpatient care.
    While the problem may be concentrated in terms of the type 
of products, this is not to say the problem, of course, is 
small. In fact, the 168 products cover every one of the major 
anatomical therapy classes used to categorize therapeutic 
pharmaceuticals, from analgesics to injectable vitamins. And in 
the case of 20 injectable oncology products that are on the 
shortages list, these are drugs that over the course of a 12-
month period were used to treat 550,000 cancer patients. So any 
disruption in the supply of those drugs will potentially affect 
a large number of patients.
    We think, though, that the concentration of the problem is 
an important point when considering solutions. To the extent 
that solutions can be focused on the segment of pharmaceuticals 
and the part of the supply chain where disruptions are 
occurring, we would expect a more successful outcome and fewer 
unintended consequences for the rest of the health care system.
    The second finding from our report is that the term 
``shortage'' can have different meanings. For over half of the 
products on the shortages list, our measure of the total 
monthly volume being shipped to end user settings, whether it 
be a hospital, a clinic, a retail pharmacy warehouse, or a mail 
order facility, that volume has, in fact, been steady or even 
increasing over the past 5 years, and this suggests that at a 
national level there may not be an imbalance between total 
demand and total supply. Instead, the shortage is being 
experienced by a particular pharmacy or in a particular region 
of the country or with a particular wholesaler or intermediary. 
Alternatively, the shortage can be for one specific 
manufacturer of a product even if there is adequate supply from 
other manufacturers.
    For the other 45 percent of the products, though, we do see 
at a national level evidence of significant reductions, on 
average 26 percent, in the monthly volume being supplied to 
hospitals and clinics, and even more volatility in monthly 
volume being supplied by individual companies. This can only 
mean severe disruption across the supply chain even if it is 
for a relatively small number of products.
    The third finding relates to the suppliers of these 
products. We see that over half of the products have only one 
or two suppliers, and this means that in the event that one 
company has a temporary disruption of manufacturing capacity, 
for whatever reasons, it may be very difficult for another 
company to replace that volume quickly and, hence, leading to a 
shortage.
    Our perspective on recommendations is grounded on what we 
know about the information and analytical approaches that can 
be applied to this situation. We believe a multistakeholder 
early warning system can be a critical tool to help the FDA, 
pharmacists, manufacturers and intermediaries predict, monitor, 
and mitigate the impact of supply disruptions. Such a system 
should include a systematic approach to risk identification, a 
continuous forecast for long-term demand for the high-risk 
sectors of the market, a volatility index focused on weekly or 
monthly changes in the supply volume, and that can be a 
sentinel of instability in the supply chain, and predictive 
modeling that helps keep a tight focus on interventions only on 
those specific parts of the market and supply chain that need 
attention.
    We are grateful for the opportunity to present our 
perspective and we look forward to today's discussion on 
solutions that are balanced, coordinated, and sustainable. 
Thank you.
    [The prepared statement of Mr. Aitken follows:]
                  Prepared Statement of Murray Aitken
    Chairman Harkin, Senator Enzi, and members of the committee, thank 
you for the opportunity to contribute to the discussion of this 
important topic. Drug shortages have become of increasing concern for 
patients, clinicians, manufacturers and policymakers. While the issue 
is not entirely new, the increased number of drugs reported as being in 
short supply has precipitated a deeper understanding of the underlying 
causes of the problem, and potential remedies to prevent future 
shortages or alleviate their impact on patient care.
    I am the Executive Director of the IMS Institute for Healthcare 
Informatics, which is focused on bringing objective, relevant insights 
and research that will accelerate the understanding and innovation 
critical to sound decisionmaking and improved patient care. We have 
recently undertaken a study based on analysis of IMS Health data and 
publicly available drug shortage lists in order to bring new evidence 
on the products and suppliers involved, and the volume volatility 
occurring in the marketplace. This work has been undertaken as a public 
service, without industry or government sponsorship.
                      methodology of ims analysis
    The basis of our analysis is a dataset developed by the IMS 
Institute and based on products listed on the Current Drug Shortages 
Sections of Web sites maintained by the U.S. Food and Drug 
Administration and the American Society of Health-
System Pharmacists. Information related to products and molecules was 
accessed on October 7, 2011, resulting in an initial list of 197 unique 
products. Of these products, 11 are considered to be widely available, 
and a further 18 are products unable to be uniquely identified in the 
IMS databases, leaving 168 products in the final dataset.
    For the 168 products, we accessed monthly volume and sales data for 
the 5-year period beginning September 2006 and ending August 2011 from 
IMS National Sales Perspectives. This measures volume in Standard Units 
and sales within the U.S. pharmaceutical market by pharmacies, clinics, 
hospitals and other healthcare providers. Sales amounts are based on 
pricing information derived from wholesaler invoices to end-users and 
does not include rebates and discounts commonly negotiated between end-
users and manufacturers, including Medicaid rebates and 340B discounts.
    Additional information related to distribution channel, therapy 
class using the Anatomical Therapeutic Chemical (ATC) Classification 
System, and characterization of the product as a brand, generic or 
branded generic was also included and derived from IMS National Sales 
Perspectives.
    For oncology products, patient counts by tumor site and regimen 
were sourced from IntrinsiQ, a unit of AmerisourceBergen Specialty 
Group, via IMS Oncology Analyzer, for the period of June 2006-June 
2011.
    Regional volume usage was derived from IMS Drug Distribution Data 
(DDD) for the period of September 2007 to August 2011.
                              key findings
    The key findings of our analysis relate to the characterization of 
the products on the shortages list; the suppliers of these products; 
and the volatility in supply volume for individual products.
Characterization of the Products on the Shortages List
    Most of the 168 products included in the IMS dataset are 
injectables (82 percent) and generics (83 percent) (Exhibit 1). This 
points to the concentration of products to a segment of the market and 
suggests the underlying causes and solutions to drug shortages should 
be focused on this part of the overall pharmaceutical sector.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    We also found that most of the products on the shortages list are 
used in hospital or clinic settings. For the injectables, 72 percent of 
the standard unit volume is supplied to non-federal hospitals, 16 
percent to clinics, 3 percent to Federal facilities, and the remaining 
9 percent goes to retail or other channels. For the oral products, the 
distribution is more directed toward retail channels, accounting for 79 
percent of the volume, and only 5 percent going to hospitals and 4 
percent to clinics.
    Although drug shortages are concentrated in terms of the nature of 
the products, they are extensive in terms of the therapy areas they are 
used in. In fact, the 168 products cover all of the major anatomical 
therapy classes used to categorize therapeutic pharmaceuticals. The 
largest share of products are used in oncology, representing 16 percent 
of the products; a further 15 percent are anti-infective products; 12 
percent are used to treat cardiovascular disease; 11 percent for 
central nervous system conditions; 9 percent for pain; a further 9 
percent are vitamins and minerals (mostly in injectable form); and the 
remaining 28 percent cover a broad range of other therapy areas 
including asthma/chronic obstructive pulmonary disease and 
immunosuppressants (Exhibit 2).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The number of patients potentially affected by drug shortages is 
also extensive. In the case of the 20 injectable oncology drugs on the 
shortages list, we estimate that 550,000 cancer patients were treated 
with at least one of those drugs during the past year. This therefore 
can represent the number of patients whose treatment could be affected 
by any disruption in the supply of these drugs.
Characterization of Suppliers
    We analyzed the firms supplying the 168 products on our shortages 
list over the past 5 years. In total, 100 companies supplied one or 
more of the products on the current shortages list over the past 5 
years. More recently, 98 separate companies controlled by 88 
corporations were supplying these products during the 3 months ending 
August 2011. The largest generic manufacturers have multiple products 
(Exhibit 3).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Over time, we see a number of companies, generally supplying 
relatively few products, entering and leaving the marketplace. Over the 
past 5 years the number of corporations supplying the 168 products has 
fluctuated, including 13 corporations that have stopped supplying any 
products on the shortages list during the past 2 years. This movement 
among suppliers is one of the underlying causes of the disruption felt 
by pharmacists when they are no longer able to source their supplies 
from established manufacturers.
    Among the 168 products on the shortages list, we identified 86 
products, or 51 percent of the total, that currently have two or fewer 
suppliers. Of those 86 products, 56 had only one supplier, and 7 had no 
suppliers during the 3 months ending August 2011 (Exhibit 4).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    While patent protected products have single suppliers and generally 
do not face supply shortages, in the generics market the relatively 
high number of products with very few suppliers may be a contributing 
factor to supply disruption. In the event that one company has a 
temporary disruption of manufacturing capacity, it may be difficult for 
another company to replace that volume quickly and hence lead to a 
shortage.
Volatility in Supply Volume
    The average monthly supply from wholesalers to end-user settings 
for the total set of 168 products has, in aggregate, increased slightly 
over the past 5 years. For the injectable products, the average number 
of standard units supplied monthly increased from 54 million in 2006 to 
56 million in 2011. For the smaller number of oral products, volume 
increased from 125 million to 157 million during the same reference 
period (Exhibit 5).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    A closer examination reveals that three distinct segments exist 
among the drugs on the current shortages list:

    (a) a ``declining'' set of 75 products that have recent monthly 
supply volume of less than 80 percent of a base period defined as 
September 2006-August 2009;
    (b) a ``stable'' set of 56 products whose recent monthly supply is 
between 80 percent and 120 percent of the base period; and
    (c) a ``growing'' set of 31 products where monthly supply is at 
least 20 percent more than the base period.

    (An additional 6 products were introduced during the 5-year period 
and not included in the above segmentation.)
    In aggregate the declining segment of 75 products have seen monthly 
supply fall about 47 percent over the 5-year period. For the injectable 
products, average monthly volume has fallen from 16 million to 8 
million standard units for month (Exhibit 6). Included in this segment 
are 12 oncology drugs, 11 anti-infectives, and 12 cardiovascular drugs, 
among others.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    For the remaining 55 percent of products in the stable or growing 
segments, the total volume has not declined, but there may be 
volatility among the suppliers of the individual products. For example, 
cisplatin--a widely used platinum-based alkylating agent used in 
treating about 85,000 patients for a variety of cancer treatments in 
the past year--has had some volatility in total monthly supply volume, 
but overall shows a growing volume trend over time. However, a 
significant level of volatility in supply at the individual company 
level is evident, including the discontinuation of production in mid-
2010 by one company that had been the leading supplier of cisplatin in 
the 2007-8 period (Exhibit 7). This level of volatility reflects 
disruption throughout the supply chain which ultimately affects 
providers and patients.

                               Exhibit 7

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Across the 50 States we see varying levels of volatility in the 
supply of products on the shortage list. For example, for the 64 
injectable products included in the declining segment, the average 
decline in monthly per capita use between the 12 months ending August 
2010 and the 3 months ending August 2011 was 26 percent. Between the 
two time periods, 13 States had declines in excess of 30 percent 
suggesting a significant disruption to patient care in a short time 
period (Exhibit 8).

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                            Recommendations
    Our analysis provides new insights--based on granular information--
about the characterization of the products on current drug shortages 
lists, the suppliers of those products and a deeper, industry-wide 
understanding of the volume dynamics and volatility for individual 
molecules and suppliers of those molecules. Our perspective on 
recommendations is focused on how existing information and analytical 
approaches can be applied to preventing or alleviating the affects of 
shortages going forward. Specifically, we believe that an Early Warning 
System for drug shortages created by the FDA or the industry can be a 
critical tool to help the regulator, pharmacists and other stakeholders 
predict, monitor or mitigate the impact of supply disruptions on the 
healthcare system.
    Specifically, the Early Warning system should include the following 
elements:

    1. Risk Identification: Systematically identify the high-risk 
sectors of the generics market. Identify all the low-cost, technically 
challenging and critical medicines--whether or not they are currently 
on shortage lists.
    2. Demand Forecasting: Continuously forecast the long-term demand 
for low-cost, technically challenging and critical medicines. Adjust 
forecasts based on such factors as demand trends, new medications, 
changes in clinical guidelines, practice patterns, care delivery 
changes and needs of clinical trials.
    3. Volatility Index: A quantitative measure to systematically track 
and report month-to-month changes in the volume of drugs supplied to 
hospitals, clinics and retail pharmacies. Volatility in supply--whether 
national, regional, by individual supplier, or for specific drug 
molecules--is a sentinel of problems in meeting demand and instability 
or dramatic change in the supply chain. Volatility itself can seriously 
exacerbate problems in meeting demand, encourage overstocking, disrupt 
patient therapies and facilitate short-term price manipulation by a few 
suppliers.
    4. Predictive Modeling: With the wealth of data available, 
predictive modeling techniques could be applied to anticipate shortages 
or supply disruptions for critically important medications at the 
national and regional levels. As data accumulate and measures are 
improved, the model can tightly focus interventions on those specific 
parts of the market and supply chain genuinely needing attention.

    Other tools would augment the Early Warning System, including self-
reporting of demand and supply disruptions by pharmacies, wholesalers, 
group purchasing organizations and drug manufacturers.
    Other tools and mechanisms are needed to augment the Early Warning 
System, including self-reporting of demand and supply disruptions by 
pharmacies, wholesalers, group purchasing organizations and drug 
manufacturers.
    We are grateful for the opportunity to present our perspective to 
this committee and look forward to discussion of the potential 
solutions.

    The Chairman. Thank you, Mr. Aitken.
    Mr. Neas, welcome back to the committee.

  STATEMENT OF RALPH G. NEAS, J.D., CHIEF EXECUTIVE OFFICER, 
       GENERIC PHARMACEUTICAL ASSOCIATION, WASHINGTON, DC

    Mr. Neas. Thank you, Mr. Chairman, and thanks, every member 
of the committee. We are very grateful for your focus on the 
issue of drug shortages. I am Ralph G. Neas, and I'm president 
and CEO of the Generic Pharmaceutical Association. GPhA 
represents the manufacturers and distributors of finished-dose 
generic pharmaceuticals, bulk pharmaceutical chemicals, and 
suppliers to the generic industry. At its core, GPhA's purpose 
is to improve the lives of consumers by providing timely access 
to affordable pharmaceuticals.
    The shortage of critical drugs is a complex, multifactor 
problem involving many stakeholders. However, much of the 
shortage problem could be solved by improving the information 
available both from and to the various stakeholders. These 
stakeholders would include drug manufacturers, wholesalers, 
distributors, group purchasing organizations, the FDA, the DEA, 
and possibly others.
    Today, we propose the creation of an accelerated recovery 
initiative, or ARI. ARI would utilize an independent third 
party, or ITP, as an unprecedented information clearinghouse to 
collect information regarding the aggregated available supply 
of critical drugs, in essence establishing a consolidated 
supply schedule, and then to use this information to identify 
potential gaps in supply compared to market requirements.
    Upon the acceptance of ARI by both the FTC and HHS, the 
initiative's mission would be to increase early visibility and 
communication between the FDA and industry relating to both 
current and potential drug shortages. Of course, the ITP would 
be gathering and disseminating information in compliance with 
all current market regulations and only under terms of strict 
confidentiality. Efforts would be focused exclusively on 
critical products where a shortage is expected to last longer 
than 90 days, and the initiative would operate in a way that 
would neither restrict competition nor cost taxpayers money.
    There can be no question that generic manufacturers are in 
the business of supplying medicine and ensuring that consumers 
and patients have access to the drugs they need. Contrary to 
some media reports, shortages are typically not caused by a 
manufacturer's decision to voluntarily discontinue supplying 
the product. Indeed, manufacturers do not and would never 
deliberately reduce the supply of essential medicines to push 
prices up.
    However, without sufficient information, our efforts 
sometimes can be misplaced. As one manufacturer put it, we try, 
but without knowing more, we occasionally end up over-solving 
one shortage while under-solving another. The FDA, working with 
industry through ARI, can help prevent this from happening. 
Indeed, ARI will allow the FDA and the industry to ensure that 
limited resources are aimed at the highest priority needs.
    This is how the initiative would work. A list of critical 
products will be determined, incorporating data from multiple 
sources. With respect to these products, industry will share 
information with the ITP regarding both available and future 
supply. The ITP will aggregate this data and communicate where 
gaps in critical products are found. Based on this information, 
individual manufacturers will indicate to the ITP how they each 
could address the shortage.
    This feedback loop would continue to help focus industry 
efforts for the most critical products on the list. As a 
result, manufacturers will be able to focus their production 
with a clear understanding of which shortages are being 
addressed and which are not. ARI will provide greater clarity 
to available supply of the list of drugs, as well as projected 
timelines for recovery.
    In addition to the initiative I've just outlined, GPhA 
believes that a recovery from this crisis could be further 
accelerated through creating a high-level team at the FDA. This 
team would enable decisionmakers from across the agency and 
manufacturers to devise strategies to address or avert critical 
shortages. We've come to think of this, and have shared with 
the FDA and with HHS, as an FDA SWAT team which could work with 
industry to make sure listed products are making it to the 
market.
    To be clear, this is not a criticism of the FDA. To the 
contrary, GPhA applauds the FDA's efforts to ensure that the 
U.S. drug supply remains the safest in the world. This 
recommendation is based on the recognition that regulatory 
efforts sometimes can have the unintended consequence of 
disrupting the supply of critical products. In fact, as we 
examine the current crisis, more than half of the shortages 
have stemmed from regulatory concerns. However, simply by using 
this SWAT team approach, we believe that the FDA could greatly 
minimize these unintended consequences without compromising 
safety in any way.
    GPhA is committed to working with this committee, the FDA, 
the DEA, and all stakeholders to minimize current drug 
shortages and prevent future shortages from occurring. Nothing 
is more important to our industry than providing patients 
access to their life-saving generic medications. With an 
intense and timely multistakeholder collaboration, we believe 
we can accomplish this goal.
    Thank you, Mr. Chair.
    [The prepared statement of Mr. Neas follows:]
               Prepared Statement of Ralph G. Neas, J.D.
                                summary
    I am Ralph G. Neas, President and CEO of the Generic Pharmaceutical 
Association, which represents the manufacturers and distributors of 
finished dose generic pharmaceuticals, manufacturers and distributors 
of bulk pharmaceutical chemicals and suppliers of other goods and 
services to the generic industry.
    Before examining how best to respond to drug shortages it is 
important to understand that this is a complex, multi-faceted issue and 
the generic industry has, and will continue, to work tirelessly to be 
part of the solution. Causal factors of drug shortages are numerous and 
do not apply in every case. They include everything from challenges in 
manufacturing and an insufficient supply of available raw materials to 
meet demand, to inadequate and delayed communications about shortages--
both within the supply chain and also within and among the Food and 
Drug Administration's (FDA) enforcement and drug shortages personnel.
    A group of generic manufacturers, including both GPhA and non-GPhA 
members, that represent approximately 80 percent of the generic sterile 
injectable products sold in the United States, are proposing to take 
unprecedented steps to build tools and practices that are specifically 
designed to accelerate the recovery of critical drugs in short supply.
    Under this recommended proposal, known as the Accelerated Recovery 
Initiative (ARI):

     An independent third party will gather current and future 
supply information from stakeholders for products identified as meeting 
the critical criteria;
     This will then be used to determine current and potential 
supply gaps, with a focus on those products where a shortage is 
expected to last longer than 90 days;
     FDA Drug Shortage staff will be updated when assistance is 
needed to facilitate production of a product in shortage; and
     A high-level team will be formed within FDA with the 
ability to quickly respond to critical shortages.

    ARI is predicated on voluntary communication between an independent 
third party and stakeholders involved in the manufacturing and 
distribution of generic injectable drugs in shortage, including, but 
not limited to: manufacturers, wholesalers, distributors, Group 
Purchasing Organizations (GPO's) and the FDA. In addition, this multi-
stakeholder approach will provide additional information focusing on 
real-time decisions and actions proposed by regulatory agencies and 
their potential impact on critical supply.
    This initiative will maintain robust competition, and will not in 
any way deal with pricing information. It will also require prior 
acceptance by the Federal Trade Commission and the Department of Health 
and Human Services. The type of information gathered and disseminated 
will increase early visibility and communication between the FDA and 
industry relating to current and potential drug shortages.
    ARI also focuses on FDA. The agency deserves tremendous credit for 
the work it is currently doing to expedite regulatory reviews and work 
closely with manufacturers. However, there is still more that must be 
done, and manufacturers would be aided by a formal process specifically 
designed to facilitate communications related to drug shortage 
regulatory issues. The industry strongly encourages the establishment 
of a high-level FDA drug shortage management team, which would include 
representation from key agency offices. This team would provide an 
avenue for timely access to FDA decisionmakers by the pharmaceutical 
industry to review strategies for addressing or averting drug 
shortages. This high-level FDA team would also be empowered to evaluate 
issues such as expediting reviews of pending supplements, which enable 
industry to address shortages of critical drug products.
    GPhA is committed to working with the FDA and all stakeholders to 
minimize current drug shortages and prevent future shortages from 
occurring. Nothing is more important to our industry than ensuring 
patients have access to their lifesaving generic medications, and with 
a joint effort among all involved we believe we can make a significant 
step toward accomplishing this goal.
                                 ______
                                 
    Good morning Chairman Harkin, Ranking Member Enzi and Members of 
the Senate Committee on Health, Education, Labor, and Pensions. Thank 
you for asking me to participate in this very timely and important 
hearing.
    I am Ralph G. Neas, President and CEO of the Generic Pharmaceutical 
Association. GPhA represents the manufacturers and distributors of 
finished dose generic pharmaceuticals, manufacturers and distributors 
of bulk pharmaceutical chemicals and suppliers of other goods and 
services to the generic industry. Generic pharmaceuticals now fill 78 
percent of all prescriptions dispensed in the United States, but 
consume just 25 percent of the total drug spending.
    According to an analysis by IMS Health, the world's leading data 
source for pharmaceutical sales, the use of FDA-approved generic drugs 
in place of their brand counterparts has saved U.S. consumers, patients 
and the health care system more than $931 billion over the past 
decade--$158 billion in 2010 alone--which equates to $3 billion in 
savings every week.
    GPhA is the third major coalition that I have had the privilege of 
leading. For 15 years, I served as the executive director of the 
Leadership Conference on Civil and Human Rights, a 60-year-old 
coalition of nearly 200 organizations that is the legislative arm of 
the civil rights movement.
    For the past several years, I was the President and CEO of the 
National Coalition on Health Care, the Nation's oldest and most diverse 
health care reform coalition. The 80 organizations that make up NCHC 
represent consumers, health care providers, large and small businesses, 
unions, older Americans, medical societies, minorities, pension funds, 
religious denominations and people with disabilities.
    Personally, I am strongly committed to the perspective of patients. 
I came down with Guillain-Barre Syndrome (GBS) 32 years ago, an often 
serious neurologic disorder, usually reversible, that kept me in the 
hospital for 155 days. More than half of those days were spent in the 
intensive care unit unable to speak, on a respirator, and totally 
paralyzed. That harrowing experience led me to help found the GBS 
Syndrome Foundation International, which now represents 35,000 former 
GBS patients. In October, we celebrated our 30th Anniversary. With 
these experiences in mind, I am proud to be here today representing 
GPhA and I am equally proud of the work our member companies are doing 
to resolve drug shortages.
                              introduction
    I would like to begin today by commending the committee for your 
focus on this important issue. As members of the public who also are 
affected by shortages, the generic pharmaceutical industry is devoted 
to working with all stakeholders to minimize current shortages and 
mitigate factors that could contribute to future shortages. We are 
acutely aware of the distress caused to patients, families and 
clinicians by the shortage of critical drugs. Drug shortages represent 
a complex, multi-faceted issue and our industry has, and will continue, 
to work tirelessly to be part of the solution.
                      why are shortages occurring?
    Before examining how best to respond to drug shortages it is 
important to understand why they are occurring. Contrary to some media 
reports, drug shortages are typically not caused by a manufacturer's 
decision to voluntarily discontinue supplying the product, and 
manufacturers do not--and would never--deliberately reduce the supply 
of essential medicines to push prices up. There can be no question that 
generic manufacturers are in the business of supplying medicine and 
assuring that consumers and patients have access to the drugs they 
need.
    Causal factors of drug shortages, rather, are numerous and do not 
apply in every case. They include everything from an insufficient 
supply of available raw materials to meet demand, to inadequate and 
delayed communications about shortages--both within the supply chain 
and also within and among the Food and Drug Administration's (FDA) 
enforcement and drug shortages personnel.
    GPhA also acknowledges that while factors contributing to drug 
shortages are many and complex, roughly half of the reported shortages 
have been attributed to problems associated with the manufacturing and 
release of generic sterile injectable products. The manufacturing 
community has been responsive to this issue and has been extremely 
active in working with all stakeholders, and especially the FDA, to 
find suitable solutions that accelerate the availability of critical 
drugs in short supply. GPhA and our member companies have spent months 
working with both policymakers and manufacturers to develop strategies 
to alleviate shortages and better collaborate with other stakeholders.
    I have also paid close attention to recent congressional hearings 
examining the economics of drug shortages and potential economic 
incentives. I am pleased to see that new and innovative ideas to 
address the problem of drug shortages continue to be discussed by the 
Congress. After speaking to GPhA's membership, our member companies 
have indicated that improved communication, an expedited process for 
qualifying alternative suppliers and increased collaboration among 
stakeholders would address the causes of the vast majority of 
shortages.
                       insufficient communication
    As the regulatory authority charged with maintaining oversight of 
the U.S. drug supply, the FDA has stepped up its enforcement efforts to 
unprecedented levels in recent years. Due to the efforts of the FDA, 
the U.S. drug supply remains the safest in the world. GPhA applauds 
these efforts and is committed to working with the agency to ensure 
that patients continue to receive safe and effective generic 
medications. With the implementation of these expanded enforcement 
measures, however, comes a need for industry and the FDA to communicate 
effectively at all stages of the process. Otherwise, these efforts may 
have the unintended consequence of adversely affecting our country's 
supply of critical drugs. Indeed, more than half of the current drug 
shortages have stemmed from regulatory concerns.
    One way to avoid such unintended consequences is by implementing 
processes whereby remedial measures could be implemented without 
completely disrupting the manufacturing of necessary products. Through 
additional remedial measures, the FDA could maintain its vigilance over 
the safety of the U.S. drug supply, while still ensuring that patients 
are receiving the medication they need. It is critical that the FDA and 
industry increase early communication relating to all proposed or 
contemplated regulatory actions that would affect our country's supply 
of critical drugs.
                    qualifying alternative suppliers
    Another important factor to note is that the pharmaceutical 
marketplace overseen by the FDA today is one that has become 
increasingly global. Nearly 40 percent of all prescription drugs 
dispensed in the United States are now manufactured outside of the 
country, and nearly 80 percent of the ingredients in our drugs are 
manufactured abroad. According to FDA estimates, the number of drug 
products made outside of the United States doubled from 2001 to 2008.
    Manufacturers face significant delays in the process to qualify 
alternate Active Pharmaceutical Ingredient (API) suppliers and 
secondary or redundant manufacturing facilities. As a result, many 
drugs only have one API supplier approved in their applications and are 
qualified in just one facility. This is in contrast to many other 
regions of the world, where supplemental API suppliers can be approved 
in as little as 30 days. Similarly, a prior approval supplement can 
take multiple years in the United States while similar changes are 
accomplished in Europe and elsewhere within a much shorter timeframe.
    The FDA should bring its oversight in this area up to date with 
today's global pharmaceutical marketplace. A more streamlined and 
timely process for qualifying new or alternate raw material suppliers 
and alternate manufacturing facilities would allow manufacturers to 
increase production of medicines in short supply sooner.
               collaboration among stakeholders is needed
    We believe these changes would provide a strong start toward 
reversing the drug shortages currently afflicting patients and 
preventing further ones from occurring. But as an industry whose entire 
business model is to make quality medicines available and affordable to 
all, we are acutely aware that a lack of supply of a critical drug can 
be devastating, even if it impacts only one patient. Despite all of the 
factors currently contributing to shortages, there are still numerous 
opportunities for generic manufacturers, and all stakeholders, to work 
together in an effort to solve the problem.
    With this in mind, the generic pharmaceutical industry has 
spearheaded the development of an unprecedented multi-stakeholder 
communication tool, which we believe will accelerate the recovery of 
critical drugs in short supply to patients in need. This database of 
information, which we have labeled the Accelerated Recovery Initiative, 
or ARI, can be utilized by all stakeholders involved in the 
manufacturing and distribution of vulnerable drugs in shortage--
including, but not limited to manufacturers, wholesalers, distributors, 
Group Purchasing Organizations (GPO's) and the FDA--in order to 
accelerate the recovery of critical drugs in short supply to patients 
in need. In addition, this multi-stakeholder approach will provide 
additional information to focus on decisions and actions proposed by 
regulatory agencies and their potential impact on critical supply. Let 
me provide some more details.
                 accelerated recovery initiative (ari)
    A group of generic manufacturers, including both members of GPhA 
and non-members, representing approximately 80 percent of the generic 
sterile injectable products sold in the United States today, are 
proposing to take unprecedented steps to establish tools and practices 
that are specifically designed to accelerate the recovery of critical 
drugs in short supply. The goal of ARI is to put in place industry 
practices that provide a more accurate, timely and comprehensive view 
of the current drug shortage situation, provide greater visibility to 
shortages and establish practices that allow for potential, voluntary 
production adjustments to lessen or eliminate the impact of a current 
shortage. Given the nearly 200 products currently identified by the FDA 
Drug Shortage staff, the initial scope of the initiative will focus 
only on those products deemed most critical, which currently focuses 
exclusively on sterile generic injectable products. We will continue to 
fine tune the inclusion criteria with a focus on products that have few 
manufacturing options and no therapeutic alternative.
    As I noted, this initiative is predicated on voluntary 
communication between an independent third party and stakeholders 
involved in the manufacturing and distribution of generic injectable 
drugs in shortage, including, but not limited to: manufacturers, 
wholesalers, distributors, Group Purchasing Organizations (GPO's) and 
the FDA. In addition, this multi-stakeholder approach will provide 
additional information focusing on real time decisions and actions 
proposed by regulatory agencies and their potential impact on critical 
supply.
    In order for this type of initiative to work, each stakeholder 
involved in the manufacture, supply and distribution of critical drugs 
in shortage that is willing to participate will communicate necessary 
information to the FDA Drug Shortage staff. Safeguards will be put in 
place to ensure that market and manufacturing information is treated 
with appropriate care.
    Further, this initiative will not limit or restrict competition, 
and will not in any way deal with pricing information. It will also 
require prior acceptance by the Federal Trade Commission and the 
Department of Health and Human Services.
    The primary focus of the ARI is to gather the current and future 
supply information from stakeholders for those products identified as 
meeting the critical criteria. This will then be used to determine 
current and potential supply gaps, with a focus on those products where 
a shortage is expected to last longer than 90 days. This type of 
information will increase early visibility and communication between 
the FDA and industry relating to current and potential drug shortages.
    The supply information will be gathered and disseminated by an 
impartial third party in compliance with all current market regulations 
and under terms of strict confidentiality. This independent third party 
will be supplied with data related to drugs currently in shortage or 
expected to go into shortage, including the name of the drug, the 
expected duration of the shortage and internal reviews to identify 
production capabilities to respond to any market shortage. Wholesalers 
and distributors will also supply product availability data to assure a 
complete review of all available inventories. The independent third 
party will then aggregate the data to provide an overall view of the 
projected available supply by product, as defined by critical product 
criteria, compared to the total market need. If the data reveals gaps 
in market supply that require FDA intervention, the information will be 
provided by the independent third party to the FDA Drug Shortage staff 
so that they may help to develop solutions with the manufacturers.
    In addition, wholesalers, distributors, distribution partners and 
GPO's also have an important role to play. It is necessary for both 
wholesalers and GPO's to establish a ``critical drug supply program'' 
that will be implemented during the time when a drug in shortage is in 
a supply recovery period. A supply recovery period is the time in which 
a product is in shortage and has not returned to market demand levels. 
The focus of the program will be to assure that timely and accurate 
information is readily available to all affiliated members, 
institutions and customers.
    The last step of ARI focuses on FDA. The agency deserves tremendous 
credit for the work it is currently doing to expedite regulatory 
reviews and work closely with manufacturers. However, there is still 
more that must be done, and manufacturers would be aided by a formal 
process specifically designed to facilitate communications related to 
drug shortage regulatory issues. The formation of a FDA drug shortage 
management team could more effectively address current drug shortages 
and minimize future shortage events. The industry strongly encourages 
the establishment of a high-level FDA drug shortage management team, 
which would include representation from key agency offices. This team 
would provide an avenue for timely access to FDA decisionmakers by the 
pharmaceutical industry to review strategies for addressing or averting 
drug shortages. This high-level FDA team would also be empowered to 
evaluate issues such as expediting reviews of pending supplements, 
which enable industry to address shortages of critical drug products.
    From an industry perspective, the formation of such a team that 
includes high-level representatives from the FDA's Center for Drug 
Evaluation and Research medical staff, Office of Compliance, Drug 
Shortage staff and Office of Regulatory Affairs could provide the 
expertise and the appropriate level of authority to effectuate rapid 
decisions on steps to address drug shortages.
    We recommend that industry work with FDA and other stakeholders to 
implement the ARI communication tool in parallel with our other 
recommendations in order to increase the channels of communication and 
strengthen our collective ability to supply patients with the medicines 
they critically need.
                               conclusion
    In conclusion, Mr. Chairman, GPhA is committed to working with the 
FDA and all stakeholders to minimize current drug shortages and prevent 
future shortages from occurring. Nothing is more important to our 
industry than ensuring patients have access to the lifesaving generic 
medications they require, and with a joint effort among all involved, 
we believe we can make a significant step toward accomplishing this 
goal.

    The Chairman. Thank you very much, Mr. Neas.
    And now, Dr. Maris, if you'll sum up, I'd appreciate that. 
Please proceed.

STATEMENT OF JOHN M. MARIS, M.D., CHIEF, DIVISION OF ONCOLOGY, 
            CHILDREN'S HOSPITAL OF PHILADELPHIA, PA

    Dr. Maris. Mr. Chairman, Senators, ladies and gentlemen, 
thank you for the opportunity to speak to this panel today, and 
I'd like to take this opportunity to thank Senator Casey for 
his very kind introduction. Senator Casey has been a firm 
advocate for children, a leader in this area, and with Senator 
Klobuchar, the legislation before us and the eloquent 
discussion today, we're very encouraged that there's movement, 
and we look forward to this committee's role in reaching 
solutions.
    Today I'd like to speak to you as a pediatrician, as an 
oncologist, and also as a cancer researcher, to really cover 
three points in my 5 minutes. I'd like to talk to you about how 
our organization, the Children's Hospital of Philadelphia, has 
responded to this crisis. I would like to talk to you as an 
oncologist and how this has affected me and my practice and the 
patients that I serve. And I'd also like to spend a brief 
minute talking about something that hasn't been discussed here 
that much, how this is affecting something that we in this 
country should be so proud of, which is our clinical research 
enterprise and how this is impacting dramatically clinical 
trials and making advancements.
    I think I speak for all of us in the field when I say that 
sitting here today we feel like we've dodged a bullet to date. 
We feel that there is this impending sense that if the status 
quo remains or there aren't substantive solutions really soon, 
that we are going to see unintended consequences of this.
    As far as I know, there's not a reportable death, yet, 
that's directly linked to drug shortage, but in my opinion it's 
just a matter of time, and that's why I'm very hopeful that 
this committee--and I sense the urgency here--will really 
address this and address this quickly so that our patients will 
be protected.
    The Children's Hospital of Philadelphia is the largest 
pediatric health care organization in the Nation. Over a 
million patients walk through our doors each year. And we've 
invested heavily in this problem. It was interesting to hear 
how many staff there are at the FDA. At CHOP we've needed to 
have three full-time people work on this problem. We have three 
individuals who do nothing else but deal with the drug shortage 
issue.
    We've had to get innovative. We had to purchase 
infrastructure to, believe it or not--we're talking about 
sterile injectables. These are solutions that come in small 
vials. We have robotics now that can take these solutions out, 
actually preserve every last drop of it so that we can get this 
out to our small patients and really be as efficient as we can. 
And we have an intensive monitoring system. And I can tell you 
that as I sit here today, these are just data from today, that 
there are 35 drugs that we use every day that we only have 
knowledge that we'll be able to have for the next 4 to 8 weeks, 
9 drugs with 2 to 4 weeks supply, 10 drugs with less than 2 
weeks supply, and there are 8 drugs that we commonly use at 
Children's Hospital that we don't have right now. And these are 
important drugs.
    To be clear, what we've put into place at CHOP is possible 
because of the resources we have, the intellectual resources, 
but it's not sustainable and it's probably not replicatable by 
many places across the Nation.
    We've heard some anecdotes, and Senator Klobuchar opened 
with a child with leukemia, and indeed let me just tell you 
briefly what happened last summer. Despite everything we had in 
place at CHOP, there was a 6-week period where we could not get 
a drug called daunorubicin. We've heard doxorubicin mentioned 
here today. There's another medicine called daunorubicin. We 
could get the doxo, and we had met and talked about this issue, 
and we needed to substitute it.
    Just imagine for a minute that you're a parent or a 
grandparent and you're sitting in a room with a physician who 
is giving you the news that your child or grandchild has 
cancer, and that we have researched this over the years and 
we've figured out a solution that's going to work most of the 
time. But one of the drugs, one of the key essential 
ingredients, we don't have.
    And so we're going to come up with a Plan B. And, no, we 
have not been able to research this plan. And, no, there's 
really not evidence that it's going to work as well. But that's 
what we've needed to do, and we've needed to do it repeatedly.
    In this particular situation, doxo, which we thought should 
be a good replacement for dauno, it's too early to know whether 
these patients will relapse and whether it impacted, but it 
definitely made them more sick. Children got mouth sores, got 
infections, spent time in the ICU. No child died from this, but 
there was no doubt it was the unintended consequence of serious 
toxicity due to this substitution.
    You have to understand that cancer care at a place like 
CHOP is very complex, dozens of therapies at the same time, an 
electronic health record that has hundreds and hundreds of 
treatment protocols. So just replacing a drug is something that 
is subject to human error and is a very time-consuming and 
inefficient process that we need to get beyond.
    My last point is that each of the children over the summer 
and most of the children treated in pediatric health care 
institutions for cancer are on clinical trials, and there's no 
doubt that we still don't have a sense of how these changes to 
the backbone of chemotherapy in clinical trials is going to 
affect our understanding of how to move the field forward.
    I think it's also very important to emphasize that there is 
a lot of excitement about developing new drugs, new therapies 
for cancer, and that's the sort of work that I do. But there is 
an unrealistic assumption that they're going to replace these 
drugs that we're talking about today, and that's not true at 
all. The new drugs are built on the backbone. Cancer research 
is incremental, and it's very frustrating to me to have these 
new drugs, some of which we've developed, and we're ready to 
move them into clinical trials, but we can't even use the 
backbone that we're going to need to build on. And so this is 
an incredibly important part of the debate that I think has not 
been discussed here in detail today.
    Mr. Chairman, I'm very pleased to be part of this process 
and to give the frontline view of what we see as a critical 
problem. I've been there in the room looking a family in the 
eye to tell them we don't have a drug, and this is something 
that I look to this committee and members of the panel to find 
solutions as quickly as possible. Thank you.
    [The prepared statement of Dr. Maris follows:]
               Prepared Statement of John M. Maris, M.D.
    My name is Dr. John Maris, Chief of the Division of Oncology at The 
Children's Hospital of Philadelphia (CHOP) and Director of our research 
institute's Center for Childhood Cancer Research. CHOP is the Nation's 
largest pediatric healthcare network with over 50 locations throughout 
Pennsylvania and New Jersey and has over 1 million patient encounters 
each year, which requires significant need for generic drugs that are 
relatively common and orphan drugs that are not widely used because of 
the high acuity and specialized nature of many of our patients.
    We are concerned with the inadequate supply of life-saving cancer 
drugs used in my pediatric oncology patients, anesthetics used during 
surgery, and a large number of ``sterile injectables'' used by our 
neonatologists in many of our most vulnerable patients. In response, 
CHOP's pharmacy developed a customized database that provides real-time 
information on our day-to-day supplies. The number of drugs in short 
supply at our hospital has been steadily increasing. In fact, there are 
eight drugs that we have completely run out of, forcing us to 
substitute potentially equally effective, but often less desirable, 
replacements.
    For example, CHOP was unable to obtain daunorubicin, a drug known 
to be essential for the cure of childhood leukemias--the most common 
pediatric malignancy--and part of our standard of care for over two 
decades. We were then forced to use the drug doxorubicin as a 
replacement, despite there being no data available on the safety and 
effectiveness of this as a leukemia therapy or any other replacement. 
Withholding the drug altogether would definitely result in a much 
higher risk for relapse. While it is too soon to know if the 
substitution impacted the curability of these children, we noted 
significantly more side effects, mainly severe mouth and gut 
ulcerations, fever and infections. While no child died from these 
complications, it is my opinion that it is only a matter of time before 
this type of tragedy will occur. Absence of a single drug requires us 
to rewrite the formulary and road maps for each patient who may receive 
a substitution, a procedure which is highly complex, resource 
intensive, and frankly highly subject to human error. Further, each of 
the children who received the substitution over the summer were in the 
midst of a clinical trial and we are deeply concerned that these types 
of deviations from accepted practice will impact NCI-sponsored clinical 
trial results.
    While in most cases we are able to address such challenges in our 
pharmacy, I suggest that any solution involve a partnership between 
providers, manufacturers and government. This begins by making sure 
that information on impending shortages is delivered responsibly and in 
real time because the lack of notice of a medication becoming 
unavailable can put patients at significant risk since many times there 
are not appropriate alternative therapies for critically ill children, 
or those with rare diseases. Other critical information we need is an 
accurate estimate of re-supply dates so that we can accurately 
determine the most appropriate conservation practices. Abolishing 
``gray market'' practices would also help assure patient safety, 
maximize legitimate supplies, and keep healthcare costs down.
    It is important to note that the NCI infrastructure has supported 
major advancements in recent years in the development of completely new 
and impactful treatments to cancer. However, each of these advances is 
built on the backbone of existing therapies, almost all of which are 
off patent at this time. Without the bedrock of established and 
curative drugs, recent discoveries mean many of our most seminal 
advances in the field are in jeopardy of being reversed due to this 
issue. Tools that help doctors provide excellent patient care need to 
be readily available and continuously improved and these include 
pharmaceuticals. We must remember at the epicenter of this issue is the 
patient and I hope the information I shared will further invigorate 
your efforts to ensure that drugs are readily available for the people 
that depend upon them most.
                                 ______
                                 
    Good morning. My name is Dr. John Maris, Chief of the Division of 
Oncology at The Children's Hospital of Philadelphia and Director of our 
research institute's Center for Childhood Cancer Research. In addition, 
I am a Professor of Pediatrics at the University of Pennsylvania where 
I direct the Pediatric Oncology Program in our National Cancer 
Institute funded comprehensive cancer center.
    I thank Chairman Tom Harkin and Senator Mike Enzi for holding this 
hearing today, in addition to Senator Bob Casey, Jr. who has made this 
and other issues impacting the lives of children a high priority.
    The Children's Hospital of Philadelphia, or CHOP as it is more 
widely known, is the Nation's largest pediatric healthcare network with 
over 50 locations throughout Pennsylvania and New Jersey. We have over 
1 million patient encounters each year and are home to one of the 
largest pediatric research programs in the country. CHOP shares the 
highest ranking on U.S. News & World Report's Honor Roll of the 
Nation's best children's hospitals. Our main hospital in West 
Philadelphia provides tertiary and quaternary care to a number of 
children having multiple chronic conditions or who are affected by rare 
pediatric diseases. Because of our high volume, we have an expansive 
need for generic drugs that are relatively common but we also utilize 
orphan drugs that are not widely used because of the high acuity and 
specialized nature of many of our patients.
    As a physician focused on childhood cancer, my top priority is to 
make sure patients receive the best and safest care possible. As a 
researcher, I am dedicated to finding cures for cancer while minimizing 
or eliminating any side effects that result from the treatments we 
provide to this very vulnerable group of children. Both roles have 
enabled our research team to identify the main genes associated with 
neuroblastoma, an extremely aggressive form of childhood cancer. As a 
result, we have moved some of these discoveries toward new therapies, a 
number of which are now in clinical trials and we certainly hope will 
someday lead to a cure.
    We work relentlessly to overcome obstacles in our work. The drug 
shortage we discuss today is one that has had a very potent impact on 
the progress we strive to make in research and clinical care. It slows 
down our progress and can even bring it to a grinding halt. 
Institutions like CHOP, and the National Institutes of Health, have 
invested significant resources towards translational research, where we 
convert our progress in the labs into treatments that may save lives in 
the hospital. However, without the drugs that are known to provide 
cures and form the backbone of our armamentarium, an important link in 
this chain is missing which can cause setbacks of epic proportions.
    My goal in this testimony is to provide insight into our concerns 
at CHOP and share with you how we have responded to the drug shortages. 
I will close with some of my personal opinions on suggested solutions 
with the hope that they may help the committee in its efforts to 
address this pressing issue.
    Beginning with our more broad concerns, I will tell you that there 
are a number of drugs we use commonly that are either in short supply 
or not available. These include life-saving cancer drugs used in my 
pediatric oncology patients, anesthetics used during surgery, and a 
large number of ``sterile injectables'' used by our neonatologists in 
many of our youngest and most vulnerable patients. In response to these 
shortages, CHOP's pharmacy developed a customized database that 
provides real-time information on our day-to-day supplies. The number 
of drugs in short supply at our hospital has been steadily increasing 
over the last few years to 123 drugs today, most of which are generic 
injectables. We are monitoring 35 drugs with a 4 to 8 week's supply; 9 
drugs with a 2 to 4 week's supply; and, 10 drugs with less than 2 
week's supply left. There are also eight drugs that we have completely 
run out of, forcing us to substitute potentially equally effective, but 
often less desirable, replacements.
    This list includes:

     mitomycin injection, which is used for some surgical and 
ophthalmic procedures;
     co-trimoxazole (Bactrim) injection (which is available on 
a compassionate use basis), but a commonly used antibiotic to prevent 
serious infections in patients with compromised immune systems;
     diazepam (Valium) injection, which is used as a sedative 
in surgery and for seriously ill patients;
     pancuronium injection, which is used to immobilize 
patients for surgery;
     ammonium chloride injection which is used to alter the 
acid/base balance in critically ill patients; and
     Selenium, chromium and cysteine injections, which are all 
used to feed patients intravenously. The shortage of these agents poses 
a particularly dire situation for patients, often the neonatal 
population, who are unable to be fed in any other manner.

    All of these shortages are presenting significant challenges to our 
medical staff and can have life-threatening consequences for our 
patients.
    I would like to provide a recent example of how the drug shortage 
problem directly and seriously impacts children with cancer at CHOP, 
and how the consequences have a potentially dire impact in both the 
short- and long-term. For a 6-week period this past summer, CHOP was 
unable to obtain daunorubicin, a drug known to be essential for the 
cure of childhood leukemias--the most common pediatric malignancy--and 
part of our standard of care for over two decades. This drug is a big 
part of why we can offer curative approaches to the majority of 
patients. We were forced to use the drug doxorubicin as a replacement, 
despite there being no data available on the safety and effectiveness 
of this as a leukemia therapy or any other replacement. We did know, 
however, that withholding the drug altogether would definitely result 
in a much higher risk for relapse. While it is too soon to know if the 
substitution impacted the curability of these children, we noted 
significantly more side effects, mainly severe mouth and gut 
ulcerations, fever and infections. While no child died from these 
complications, it is my opinion that it is only a matter of time before 
this type of tragedy will occur. You must understand that delivery of 
cancer care to children requires a highly complex infrastructure. At 
any one time, we have about 50 children receiving chemotherapy at CHOP 
and there are over 300 different cancer treatment road maps written 
into our electronic health record. Absence of a single drug requires us 
to rewrite the formulary and road maps for each patient who may receive 
a substitution, a procedure that is highly complex, resource intensive, 
and frankly highly subject to human error. Finally, each of the 
children who received the substitution over the summer were in the 
midst of a clinical trial, and we are deeply concerned that these types 
of deviations from accepted practice will impact NCI-sponsored clinical 
trial results.
    Another shortage we're experiencing here at CHOP includes some 
ingredients used in total parenteral nutrition (TPN), which is a way of 
supplying all the nutritional needs of the body by bypassing the 
digestive system and dripping a nutrient solution directly into a vein. 
The intravenous compound consists of carbohydrates, protein, fat, 
multivitamins, and numerous electrolytes and minerals essential to 
sustain life in patients unable to ingest food by other means. 
Approximately 50 percent of the patients admitted to CHOP's neonatal 
intensive care unit (NICU) have conditions such as gastrointestinal 
abnormalities and/or extreme prematurity, which require TPN to survive. 
CHOP often finds that many of the ingredients essential to TPN are 
either completely unavailable or on shortage. For some of these 
ingredients, such as selenium (which is one of the injectables that we 
are completely out of), there is no substitution. For others, including 
sodium phosphate, there are alternative agents, but these alternative 
agents contain other ingredients (like aluminum) that may be harmful to 
patients, resulting in neurotoxicity or renal failure. The inability to 
provide appropriate TPN to patients may result in inappropriate 
nutrition, leading to electrolyte abnormalities, negative developmental 
outcomes (cognitive and physical), and longer hospitalizations. In 
order to prevent these complications, physicians, pharmacy and 
nutrition staff must invest a significant amount of time to develop an 
appropriate substitution, often limited to oral supplements. However, 
many children cannot take these due to their illness, leaving their 
families and doctors with no alternative. The only solution to this 
problem is the return of the electrolytes and trace elements in 
shortage, the major components of TPN, back to the market.
    In most cases, we are able to address such challenges in our 
pharmacy. On a daily basis, our pharmacy purchasing staff monitors the 
availability of medications known to be in short supply nationally and 
enters this information into a customized database for tracking 
purposes. The Pharmacy has a weekly meeting of key personnel 
(supervisors, managers and clinical pharmacists) to review each 
shortage individually, update the status, and create a contingency plan 
for ongoing issues. Key physicians are contacted regarding shortages 
that may affect their patient population and plans for conservation and 
alternative therapies are created and implemented, often on an emergent 
basis, as there is often no notice that a medication is about to become 
unavailable. Conservation measures may require significant effort on 
the pharmacy department, in terms of re-distributing supplies, 
repackaging large quantities into smaller quantities, and tracking 
prescribers down to change orders. We have invested over $2 million by 
purchasing two ``robots'' which allow us to more efficiently use and 
repackage medications that we buy in large quantities. This allows us 
to stretch our supply and use every drop of a particular drug. The 
Hospital's response is designed to help us avert disruptions in patient 
care while ensuring the safety of our patients. These resources 
represent a significant financial investment, but help us mitigate the 
impact of drug shortages here at CHOP. All of these processes take a 
minimum of three full-time CHOP pharmacy staff persons.
    While these efforts have helped us address these challenges, we 
have not overcome them entirely. I suggest this requires a partnership 
between providers, manufacturers and government. This begins by making 
sure that information on impending shortages is delivered responsibly 
and in real time. S. 296, legislation introduced by Senators Amy 
Klobuchar and Casey, coupled with President Barack Obama's Executive 
order, will require drugmakers to notify the Food and Drug 
Administration of shortages and this is an important step in the right 
direction. We need this information because the lack of notice of a 
medication becoming unavailable can put patients at significant risk, 
since many times there are not appropriate alternative therapies for 
some of these critically ill children, or those with rare diseases. 
Without notice, there is no time to conserve or prepare for a prolonged 
absence of a routinely used medication. Other critical information we 
need is an accurate estimate of re-supply dates. These are often a 
moving timeline that is continually being pushed into the future, 
without any target date in sight at all. Knowing when a medication will 
truly become available again would help us determine the most 
appropriate conservation practices. Abolishing ``gray market'' 
practices would also help assure patient safety, maximize legitimate 
supplies, and keep healthcare costs down.
    For me, as someone who spends significant effort developing new 
therapies for cancer, the paradox is quite striking. The NCI 
infrastructure has supported major advancements in recent years in the 
development of completely new and impactful treatments to cancer. 
However, each of these advances is built on the backbone of existing 
therapies, almost all of which are off patent at this time. It is quite 
striking that it is easier for me to get to my patients a drug 
discovered only recently and with a limited, and sometimes nonexistent, 
track record of curing children with cancer, but I cannot get them 
drugs that have been the bedrock of our curative therapies since the 
1970's. Modern cancer therapy is not a replacement of the old ways; it 
is an integration and an enhancement of established curative methods. 
Without the bedrock of established and curative drugs, recent 
discoveries mean many of our most seminal advances in the field are in 
jeopardy of being reversed due to this issue.
    I close today by commending this committee for not only 
investigating the issue, but for also helping to identify a solution 
for it. While I have shared insight into how The Children's Hospital of 
Philadelphia is addressing drug shortages, I will tell you that our 
efforts have required us to be nimble and shift resources away from 
other priority child health demands, so that we may address this 
important problem. We have very high standards for patient care and 
safety and we will not allow this crisis to compromise that. As a 
pediatric oncologist, I am awestruck at how such an issue can so 
dramatically impact the children afflicted with cancer and the research 
infrastructure we have built over decades to arrive at curative therapy 
for all. As standards continue to rise, as they should, the tools that 
help doctors provide excellent patient care need to be readily 
available and continuously improved. These tools include 
pharmaceuticals. We must remember at the epicenter of this issue is the 
patient and I hope the information I shared will further invigorate 
your efforts to ensure that drugs are readily available for the people 
that depend upon them the most.

    The Chairman. Thank you, Dr. Maris. Thank all of you. We'll 
begin a round of 5-minute questions.
    One thing that's come through to me from the first panel 
and from this panel--almost every one of you talk about it--is 
the need for early warning, early information coming from the 
manufacturers to FDA. Mr. Neas had the ARI. Mr. Aitken, you 
talked about an early warning system. I guess those are similar 
concepts. Dr. Maris, you talked about it in your testimony, 
too. Dr. Crosse, in your findings, GAO found that.
    Somehow FDA is not getting any kind of advanced warning 
from manufacturers that they may potentially face a shortage. 
Is that correct?
    Ms. Crosse. Yes.
    The Chairman. OK. But you point out, Dr. Crosse, that FDA 
does not have the authority to mandate this.
    Ms. Crosse. That's correct. Currently they have a very 
narrow authority.
    The Chairman. Very narrow authority.
    Mr. Neas, maybe this is for you. Would the manufacturers 
voluntarily enter into some agreement with the FDA to provide 
upfront information when they expect to see a shortage? As I 
said earlier, the problem is you get two or three or four 
manufacturers, and FDA doesn't really know what they're all 
doing. If they had this reporting in, then FDA could take a 
look and see and anticipate whether or not there may be a 
shortage.
    But is this something voluntarily that they would do, or 
does FDA need some more authority to compel this type of 
information?
    Mr. Neas. Mr. Chairman, many of the generic manufacturers 
already voluntarily supply that type of information. Having 
said that, we're working with many members of the Senate and 
the House looking at these notification bills, and we are 
working with the members, and we want to make sure there are no 
unintended consequences, especially with respect to the gray 
market and violating confidentiality.
    We're also thinking that it probably should apply to 
everyone in the supply chain, not just with respect to 
manufacturers. There are some really good ideas out there, and 
we just want to make sure that it's framed precisely so that we 
can all have multistakeholder support.
    The Chairman. I'd like to know what that precisely is. So 
we kind of all agree they need this information one way or the 
other, but then you get to the second problem, Dr. Crosse, 
which you point out, so what does FDA do with it? They have no 
authority to tell a manufacturer you've got to produce more or 
to do something. Then what do you do with that information?
    Ms. Crosse. We found that when FDA did get advance notice, 
they were able to be pretty effective. In the majority of 
instances where they knew about a potential shortage, they were 
able to take steps that were able to prevent that shortage from 
really becoming the full-blown kind of problem that we're 
seeing with other drugs. The problem is that right now, the 
majority of the time they don't know about a problem in 
advance. They learn about it from hospital pharmacists, from 
patients, from other systems that are collecting data. FDA is 
not finding out about it soon enough.
    The Chairman. I still wonder what they do. If they see a 
shortage coming, they can't go to a manufacturer and say 
produce more, can they, Mr. Aitken?
    Mr. Aitken. I think here also we need to differentiate the 
nature of what a shortage is. I think a manufacturer that is 
anticipating that they will reduce their production of a 
particular product, that's one type of issue that we've heard 
talked about.
    But shortages exist because demand exceeds supply, and 
that's why we believe actually you need to factor in the demand 
forecasting for perhaps a 3- to 5-year period in advance, 
understand where that incremental capacity can come from, from 
the various manufacturers. Even if an individual manufacturer 
may not be reducing their actual supply, there may still be a 
shortage.
    I think, though, this has to be grounded with the 
manufacturers, but it does have to be multistakeholder. The 
intermediaries are an important part of this as well.
    The Chairman. Mr. Neas. Dr. Maris.
    Mr. Neas. Mr. Chairman, I do want to re-inforce the 
accelerated recovery initiative that we're talking about. FDA 
has so much on its plate, and we're definitely supportive of 
increasing resources and addressing the crisis.
    With respect to looking at the supply schedule, that's why 
we think this new initiative, this unprecedented private 
sector, nonprofit initiative where we could actually collect 
the necessary information and come up with an aggregated 
available supply of critical drugs and get a consolidated 
supply schedule, and then use this information to identify 
potential gaps in supply compared to the current market 
requirements. We think this is market-based. We think it comes 
from the industry. We know this is a variable problem, but we 
want to work with FDA and with everybody in the supply chain.
    The Chairman. Dr. Maris.
    Dr. Maris. In terms of projecting demand, I think that at 
least in the oncology field, there are decades of data, and I 
think it's pretty clear what the demand is going to be for most 
of the sterile injectables for oncology.
    In terms of tracking, I mean, what we do at CHOP is we 
don't just track the manufacturers. We track at multiple points 
along the supply chain, and I think that's been a critically 
important part of our being able to stay somewhat ahead of it 
and knowing more from the supply chain side when there's going 
to be an impending shortage. The reason why it's so critical is 
that we can make those alternative plans sooner rather than 
overnight.
    The Chairman. Thank you all very much. My time has expired.
    Senator Merkley.
    Senator Merkley. Thank you, Mr. Chair.
    Dr. Maris, could you comment on the impact that the stress 
has on patients when patients find out that drugs may not be 
available when they're in the third course of treatment, or 
that the drugs may have to be switched to something else and 
they are not sure if it will work? And in general, whether it 
makes a difference as to whether a patient is able to focus 
their mind and heart on healing or has to focus their mind and 
heart on, wow, am I going to be able to have the drugs 
available?
    Dr. Maris. Thank you for the question, and I think that the 
quick answer to your question is it's not measureable, but it's 
significant. I think that, at least in pediatric oncology, this 
conversation most often comes up during that incredibly 
horrific time of diagnosis when there is so much going on in 
terms of being faced with a child with a life-threatening 
illness, being faced with a major change in life as families 
know it, the reality that therapy is on its way, and then to 
hear that there is a major chink in the armamentarium is 
devastating. I don't know how to articulate it any better that 
it is a very significant problem.
    Senator Merkley. And you noted often this is a time, at the 
beginning of treatment or diagnosis, but I've talked to a 
patient, and my impression is it's not that uncommon for it to 
happen in the middle of a course of treatment as well, first 
starting with a delay, come in Thursday rather than Tuesday, 
and then getting calls saying we still don't have the drugs, 
throwing the whole family into chaos as to what role should 
they be playing in trying to track down appropriate drugs.
    Dr. Maris. And there's no doubt that the time of diagnosis 
is when families are most vulnerable, but during therapy as 
well. To have a potentially curative therapy withdrawn from 
being available to you is quite, quite difficult. And a point 
that I'd really like to make from the physician side of things 
and the researcher side of things is substitution is, at best, 
an inexact science.
    Senator Merkley. And you had noted in your testimony that 
in some ways a bullet has been dodged because there's not an 
attributable death. But certainly I have an impression from 
medical providers in Oregon that whereas there may not be an 
exact correlation of saying this person died because something 
was unavailable, that many, many times, almost on a daily 
basis, shortages are compromising the effectiveness of 
treatment. Would that be fair to say?
    Dr. Maris. I think it would be not only fair, and I'd like 
to expand on that by saying that I cannot pick up the medical 
literature and say this case report directly links drug 
shortage to a death, but I think all of us in the field feel 
that it is impacting patient safety and quality care quite 
dramatically already, and we're just very concerned that this 
is the tip of the iceberg if we don't do something soon.
    Senator Merkley. Thank you very much.
    Mr. Neas, several of us are trying to get our hands around 
this gray market. It's clear that when there is something in 
short supply, there's a temptation to try to gain a supply of 
it and gain as much as possible, increase the shortage, and 
then be able to sell at a high profit. We heard testimony 
earlier about a 100-fold increase.
    As I think about the pharmaceutical benefit managers, 
they're in the business under contract to purchase drugs from 
the manufacturers, under contract to deliver. Are there some 
PBMs that appear to be in the business of buying extra amounts, 
hoarding them, raising prices, or is it the impression that 
really, no, this would never happen within the official system? 
We're talking about third-party players who are coming in to 
try to gain these supplies and then sell them at horrifically 
increased prices.
    Mr. Neas. Senator, I'm not aware of any incidents within 
the pharmacy benefit managers. I do want to echo, however, what 
you have said, and Senator Blumenthal and others. It's truly an 
outrageous situation. As some of you know, I've just completed 
my third month as the new CEO. But in my first week, I had a 
chance to attend the FDA workshop on drug shortages, and there 
were repeated references to the gray market. But no one could 
really get a good handle on how much of a problem it was.
    My very first question after my presentation when we were 
in the panel was who has jurisdiction? Who is invested by the 
law, by Congress? Is it the FTC? Is it Department of Justice? 
Who has responsibility? I'm not sure any of us have gotten the 
real response as to the extent of the problem, who is 
responsible, and who should be investigating and enforcing. I 
think it's a major issue.
    Senator Merkley. One doctor told me that his institution 
refuses to pay these inflated prices. But then families, when 
the institution can't acquire the drug, are searching the 
country over the Internet, so on and so forth, trying to find 
the drug for their ill family member, and I want to echo what 
you just said. It's absolutely unacceptable. Certainly I want 
to work with all my colleagues and work with you all and the 
industry on how can we stop this drug scalping, which 
aggravates existing shortages. To me it's absolutely 
unacceptable. And so I hope to get your help, all of your help, 
in finding a way to address this.
    Yes, doctor?
    Dr. Maris. I just want to add that there's been a lot of 
discussion about who this gray market is, and I don't know why 
it's a mystery. I mean, we get faxes every week, and we just 
shred them. But, I mean, you can have them.
    Senator Merkley. Thank you. I would appreciate if you could 
set aside a week's supply, and it appears that there's a gap 
here as we're hearing the testimony. It seems like there's a 
gap in terms of no one having accountability. It hasn't become 
the FDA's role to investigate this and take it on. Apparently, 
attorneys general haven't taken it on, perhaps because it's not 
a crime.
    But we have to fill this gap, and I think that's a very 
valuable insight coming out of this committee, and we have to 
devise a way, if it's not illegal, to make it illegal and to 
end this practice.
    I thank you all very much.
    The Chairman. Thank you, Senator Merkley.
    Well, there is a former attorney general who is focused on 
this. Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman, and my thanks 
again for having this hearing and all of your excellent 
testimony.
    Dr. Maris, it may be no mystery, but the problem is there 
has been no real investigation. That's the very simple answer 
to a doctor, talking to you as a former attorney general. But 
as a lawyer, some of these practices are quite clearly against 
the law, existing law. This kind of anti-competitive misuse of 
market dominance fit almost a textbook case for an FTC or 
Department of Justice investigation. And so I would take your 
comment as further support for it.
    Mr. Neas, I first want to thank you for your very 
distinguished work in the area of consumer protection, as well 
as civil rights and civil liberties, and welcome your proposal, 
which I think is helpful in advancing the debate or discussion. 
Simply to think of a team, a SWAT team as you called it, that 
would be more proactive and interventionist, aggressive in this 
area I think is a welcome initiative.
    My question to you is whether the FDA really has sufficient 
authority now to make the SWAT team effective. The concept may 
be good, but you've heard the GAO report, Dr. Crosse in 
particular, talk about what the FDA cannot do now. And so I 
wonder whether your team proposal wouldn't call for more 
authority on the part of the FDA.
    Mr. Neas. That's a good question, Senator. I'm not sure of 
the answer. I know something has to happen. We've heard about 
the backlog and the shortage problem, and the FDA needs so much 
help. They're so good, but they need so much help, just 
materials from the Office of Generic Drugs. The median approval 
time of an abbreviated new drug application is now 30 months 
for a new drug application. That's 65 percent higher than 4 
years ago. There are now 2,000 abbreviated drug applications 
that are over 180 days, 2,000, another 600.
    They need personnel. They need prioritization. There's got 
to be more coordination. I think the SWAT team approach--Drug 
Shortage does an unbelievable job. But we were told we went 
from three or four to seven or eight, or eight or nine.
    When you stated the question about the nature of the 
crisis, I think the response of the multistakeholder 
collaboration, its intensity should match or exceed the nature 
of the crisis. If this is this kind of a crisis, I think eight 
people at Drug Shortage is far fewer than they need.
    And by the way, we have worked with FDA on the PDUFA bill, 
which will be before you all. And Senator Harkin, Mr. Chairman, 
we've talked about it one on one. It is going to be an 
enormously consequential legislative measure, providing 800 or 
900 more inspectors with respect to facilities inspections, but 
it's also going to help with the abbreviated drug problem, the 
application and approval problem.
    But there's got to be that coordinated prioritization. And 
I'm not saying there's not talk in meetings and prioritization. 
I think it has to happen on a far higher level with much more 
intensity and effectiveness.
    Senator Blumenthal. I thank you for that answer, and I 
agree with you on your comments about the staff shortage.
    Dr. Crosse, let me ask you, your report says that the drug 
shortages--and I'm going to quote exactly the line--``65 
percent of shortages involve drugs that were in short supply 
more than once.'' Does that mean that the same drug was in 
short supply more than one time; in other words, repeated 
times? I would read the plain English as saying that.
    Ms. Crosse. Yes, that is what we mean. Many of these drugs 
have been in short supply multiple times over the last decade. 
Some of the drugs that we looked at in detail had been in short 
supply as many as five times.
    Senator Blumenthal. It isn't as if there's a short supply, 
there's a manufacturing problem, the FDA comes in, offers 
friendly advice, the problem is fixed, no problem again. These 
are chronic, repeated shortages.
    Ms. Crosse. In some instances, they are. All of the 15 
drugs that we looked at in depth, I think there were only four 
of them that had not been in short supply multiple times across 
the last decade.
    Senator Blumenthal. One last question, and thank you for 
your great work on this report. You say that, again in the 
report, that over half--and I'm quoting--``over half of 
shortages reported during the relevant time period were in 
generic injectable drugs.'' As others have commented here, a 
substantial percentage were not in that category. Do you know 
the percentage?
    Ms. Crosse. We do have information in the report. I'd have 
to sit here and add those numbers up, but we do have a figure 
in the report that lays that out. The injectable drugs that 
were available only in generic form, 53 percent. An additional 
15 percent of injectable drugs were available only in brand 
name forms. Then there were 16 percent that were orally 
administered drugs available in generic form. That could be 
generic and brand name. And another 4 percent were orally 
administered drugs available only in brand name form. And then 
there were 12 percent of other types of drugs that were 
topicals and other sorts of things.
    Senator Blumenthal. I would like to have an opportunity for 
my staff to contact you and verify those numbers. And also, 
since I'm out of time, I can't ask this question. But I'm 
interested in why the FDA does not have sufficient authority 
now to require notification of a drug shortage under 506(c) of 
the Federal Food, Drug and Cosmetic Act. I gather it is 
requiring some kind of notification, and why it does not have 
sufficient authority now.
    Ms. Crosse. Right. The current authority only relates to 
where there's a sole supplier of a drug, and that drug has to 
be life-supporting, life-sustaining, or to prevent a 
debilitating disease or condition. It's a narrow set of drugs 
that are covered by the current authority.
    Senator Blumenthal. Is that as a matter of regulation?
    Ms. Crosse. That's their statutory authority.
    Senator Blumenthal. OK. Thank you very much.
    Thank you again to the entire panel. You've been very 
helpful.
    The Chairman. Senator, I think Mr. Neas wanted to respond 
to this.
    Senator Blumenthal. I'm sorry.
    Mr. Neas. Mr. Chairman, thank you so much. I just need 30 
seconds. Is that all right?
    The Chairman. Absolutely.
    Mr. Neas. This accelerated recovery initiative, which is 
brand new in terms of being announced today, the 
multistakeholder approach that people have been talking about, 
I do want you to know that Premiere, one of the group 
purchasing organizations, has come out for it today, and I 
believe there could be a number, maybe all of the group 
purchasing organizations. We've had pharmacists, hospitals, 
American Cancer Society. I've also met with John Castellani 
about working together on drug shortages.
    I'm just making a point to demonstrate momentum, but most 
importantly the multistakeholder collaboration within the 
industry, but also with FDA, with you all, and with the 
executive branch.
    Senator Blumenthal. I would welcome that cooperation as we 
move forward. Thank you very much.
    Thank you, Mr. Chairman. Sorry to go over my time.
    The Chairman. Oh, that's fine, Senator Blumenthal.
    Senator Casey.
    Senator Casey. Thank you, Mr. Chairman. I know we're at the 
end of the hearing, and I apologize for my back and forth here.
    The Chairman. Oh, no. Please.
    Senator Casey. It's been one of those days.
    Doctor, and I know our other witnesses--I'll make sure that 
I submit questions for the record. I'm grateful for your work 
and the scholarship and the advice that you give to us. But I 
wanted to start with Dr. Maris, and I'll be rather brief.
    I know that Children's Hospital in Philadelphia has 
invested a tremendous amount of time and resources trying to 
manage this problem and trying to deal with it directly, and I 
guess I'd ask you, because I know you've got a technological 
infrastructure and other means to help track these shortages, 
but what advice can you give, if any, that's relevant to a 
smaller entity, a smaller hospital or hospital system or in a 
community where they may not have the IT resources, they may 
not have the opportunity to invest in the way that you have? 
Any kind of common practices that would prevail, no matter what 
the level of investment or resources, that you could give us 
some advice about?
    Dr. Maris. Thank you for that question. I'll answer it two 
ways. The first answer is that it's very difficult and may not 
be practical for many smaller institutions to do what we've 
been able to do. That was one of the points I wanted to get 
across is that we've been able to address this issue, but many 
places may not be able to.
    In terms of tangibles that we can share, there's no doubt 
that the grassroots tracking system that we put into place, the 
databasing, is already being shared amongst the pediatric, the 
Children's Health Care Association and the major children's 
hospitals. But how we can trickle that down to all the 
children's hospitals is something that we have not addressed 
yet.
    Senator Casey. And we'll try our best to be able to provide 
that kind of feedback.
    One of the main purposes of the legislation that Senator 
Klobuchar and I and a whole host of others have been working on 
is to provide that early warning system in place that several 
of our witnesses today have spoken to, in one kind or another.
    I want to make one point for the record. I'll just state 
this and then conclude.
    There's been some talk about the causes here, and I noticed 
that, Mr. Neas, in your testimony about why this is happening, 
you say in your testimony that there are multiple reasons, but 
insufficient supply of available raw materials is one you cite, 
inadequate or delayed communications about shortages, and I 
know the GAO report cites a number of manufacturing-related 
causes.
    I think there's been some indication in Washington here 
that folks are pointing to price and reimbursement. I think we 
got a--especially in light of your testimony, how important 
that was to have you outline what the causes are, not some of 
the things we've heard from folks here in Washington. That's an 
important point that you made to help us better understand not 
just the causes but, therefore, some of the solutions.
    I know we're wrapping up, and I'm just grateful that you 
gave us this time and bring to us your expertise. Thank you.
    The Chairman. Any last thing from any of our witnesses 
before we adjourn for the day?
    [No response.]
    If not, I also thank you all very much for your work in 
this area, your leadership, and for being here today.
    I think we got good testimony today from both this panel 
and the previous panel. It is a complex problem, but I don't 
think it's unsolvable.
    I thank you all very much. The record will remain open for 
10 days for Senators to submit any other comments or questions.
    And with that, the committee will stand adjourned. Thank 
you.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

Prepared Statement of Jerry A Cohen, M.D., President, American Society 
of Anesthesiologists; and Arnold J. Berry, M.D., M.P.H., Vice President 
     for Scientific Affairs, American Society of Anesthesiologists
    On behalf of the over 48,000 members of the American Society of 
Anesthesiologists (ASA), we would like to thank Chairman Harkin and 
Ranking Member Enzi for holding a hearing regarding drug shortages on 
December 15, 2011, and allowing ASA the opportunity to submit a 
statement for the record. We greatly appreciate your willingness to 
bring this important topic before the Senate Committee on Health, 
Education, Labor, and Pensions and for your efforts to address this 
issue.
    As the recognized leader in patient safety, anesthesiologists are 
seriously concerned about the toll drug shortages are having on our 
patients. In April 2011, ASA conducted a survey of 1,373 
anesthesiologists to quantify the impact of drug shortages on our 
patients and practices. Our survey results demonstrated that as a 
result of drug shortages, 51 percent of anesthesiologists altered a 
procedure in some way, 48 percent felt shortages resulted in a less 
optimal patient outcome, 48 percent reported longer operating room or 
recovery times and 10 percent postponed or cancelled procedures. While 
these numbers may be alarming they pale in comparison to the 98 percent 
of anesthesiologists who experienced a drug shortage during the past 
year, or the 90 percent of anesthesiologists that reported a shortage 
of 1 or more drugs at the time of the survey.
    One of the most common drugs for which anesthesiologists reported a 
shortage is propofol. In fact, 88 percent of anesthesiologists reported 
experiencing a shortage of this drug. For anesthesiologists, propofol 
is one of the most commonly used drugs for the induction of anesthesia 
or for providing sedation. Other drugs used for these purposes may 
result in less than optimal patient outcomes including prolonged 
awakening, longer stays in recovery prior to discharge and increased 
nausea and vomiting. While anesthesiologists are trained to safely use 
multiple drugs, and can often find alternatives for drugs in short 
supply, these shortages can cause decreased patient satisfaction 
(prolonged awakening, delayed discharge, nausea) or adverse outcomes, 
including death in extreme situations (e.g., trauma patients, unstable 
hemodynamics, airway emergencies).
    In November 2010, ASA along with the American Society of Clinical 
Oncology, the American Society of Health-System Pharmacists, the 
Institute for Safe Medication Practices and the American Hospital 
Association co-convened a Drug Shortage Workshop Summit.
    This Drug Shortage Summit Steering group, consisting of the co-
conveners, manufacturers, distributors and group purchasers, released 
initial findings and continued to meet over the course of the next 10 
months producing a series of five recommendations for regulatory and 
legislative action. The work group made the following 
recommendations.\1\
---------------------------------------------------------------------------
    \1\ Regulatory and Legislative Recommendations from the Drug 
Shortages Summit Steering Group. Drug Shortage Legislative-Regulatory 
Work Group: American Society of Anesthesiologists et al. November 5, 
2011. http://www.ashp.org/drugshortages/summitreport.

    1. Reallocate resources within FDA and for the Congress to 
authorize and appropriate funding for FDA activities that prevent or 
mitigate shortages.
    2. Require manufacturers to report product discontinuations and 
manufacturing interruptions 6 months in advance or upon determining 
that production will not meet average historical demand. Establish 
communications methods to provide accurate and timely information to 
health care providers. Establish methods to better predict the 
seriousness and duration of drug shortages.
    3. Establish criteria for determining whether a drug is vulnerable 
to shortage. Designate drugs that are vulnerable to shortage as part of 
the FDA approval process. Establish appropriate incentives for 
manufacturing redundancies or other means of producing emergency 
supplies for drugs that are deemed vulnerable to shortages. The 
pharmaceutical industry should collaborate with regulatory and 
legislative entities to identify these incentives.
    4. Require collaboration between the FDA Center for Drug Evaluation 
and Research divisions and the Attorney General to establish a process 
that would expedite the increase in manufacturing production quotas 
when needed in response to drug shortages of controlled substances.
    5. Leverage current FDA pathways to expedite the approval process 
for medically necessary unapproved drugs that are vulnerable to 
shortages without compromising the safety of the drug.

    While drug shortages are an issue for patients and physicians, 
shortages also negatively impact health care costs. Drug shortages have 
resulted in significant price increases and have often caused providers 
to search alternative sources to obtain critically necessary drugs. In 
a recent study, Premier found that the average markup on a drug sold in 
the grey market is 650 percent. However, for propofol the average 
markup is a startling 3,161 percent.\2\ Anesthetic drug shortages can 
increase procedure and recovery times as a result of anesthesiologists 
being forced to select alternative therapies, as well as increase 
societal and health system costs for cancelled or postponed cases. At a 
time in which Congress and the Administration are focused on reducing 
health care expenditures and maximizing patient safety, quality and 
satisfaction, drug shortages present a considerable obstacle to these 
important objectives.
---------------------------------------------------------------------------
    \2\ Cherici, Coleen; Patrick McGinnis and Wayne Russell. Buyer 
Beware: Drug Shortages and the Gray Market. Premier Inc. August 2011. 
http://www.premierinc.com/about/news/11-aug/Gray-Market/GrayMarket-
Analysis-08152011.pdf.
---------------------------------------------------------------------------
    Anesthesiologists are end users of drugs and need to be better 
informed about drug shortages and the duration of the shortages. We are 
pleased to see that Congress and the Administration recognizes the need 
for provider notification and has taken steps to address this issue.
    Recently, the Administration has taken a number of steps to combat 
drug shortages. On October 31, 2011, President Obama issued an 
Executive order that would quicken the review process for applications 
to start or change production of drugs in shortage, widen the reporting 
of shortages and expand notifications of shortages and sharing relevant 
information regarding possible price gouging with the Department of 
Justice. We commend the Administration for their efforts. These are 
important steps to address drug shortages, and we fully support them.
    Also, we fully support and thank Senator Amy Klobuchar for 
introducing the bipartisan Preserving Access to Life-Saving Medications 
Act (S. 296), which would require drug manufacturers to notify the Food 
and Drug Administration if there is an interruption in manufacturing 
that could lead to a drug shortage. Currently, the Senate version has 
20 cosponsors and continues to gain support. We strongly urge Congress 
to pass this legislation during the 112th Congress.
    In addition, ASA looks forward to working with Senator Hatch as he 
develops legislation to address drug shortages, and we look forward to 
working with all members of the Senate Committee on Health, Education, 
Labor, and Pensions to address this issue.
    Again, thank you for holding such an important hearing on an issue 
that if addressed properly can improve quality of care for our 
patients.
                                 ______
                                 
             Department of Health & Human Services,
                      Food and Drug Administration,
                                   Silver Spring, MD 20993,
                                                    March 27, 2012.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510.

    Dear Mr. Chairman: Thank you for providing the opportunity for the 
Food and Drug Administration (FDA or the Agency) to testify at the 
December 15, 2011, hearing before the Committee on Health, Education, 
Labor, and Pensions entitled ``Prescription Drug Shortages: Examining a 
Public Health Concern and Potential Solutions.'' We are providing 
responses for the record to written questions from certain members of 
the committee sent to us by committee staff on January 19, 2012.
    If you have further questions, please let us know.
            Sincerely,
                                            Jeanne Ireland,
                            Assistant Commissioner for Legislation.
                                 ______
                                 
 Response to Questions of Senators Casey, Blumenthal, Enzi, Burr, and 
               Hatch by the Food and Drug Administration
                       questions of senator casey
    Question 1. Some people have suggested that drug shortages are, at 
least in part, related to changes in regulatory actions and standards, 
as well as increased enforcement, on the part of the FDA. For example, 
some have suggested that the FDA is now requiring manufacturers, in 
particular sterile injectable manufacturers, to meet higher levels of 
quality for processes and products than it did over the past few 
decades. Can you comment on whether the FDA Good Manufacturing 
Practices (GMPs) or other standards have changed with respect to 
sterile injectables? Have the amount of resources, or the priority that 
FDA has placed, for enforcement of GMPs and other standards increased 
in the past few years for sterile injectables? Finally, can you comment 
on whether technology has changed over the past decade in a manner that 
allows the FDA and/or manufacturers to track the purity of drugs, or 
the quality of drug products and manufacturing processes, in a way that 
was not previously possible?
    Answer 1. The trend of increased drug shortages does not correspond 
to an increase in regulatory requirements. FDA does everything in its 
power to prevent and/or mitigate drug shortages, including exercising 
regulatory flexibility. FDA carefully considers the impact of any drug 
shortage on patient care and access before taking any enforcement 
action.
    There have been no recent major changes to the Current Good 
Manufacturing Practice (CGMP) regulations that would substantially 
impact drug product manufacturing, including sterile injectables. The 
CGMP regulations for finished pharmaceuticals are the minimum standard 
by which drugs must be manufactured, and are written to be flexible and 
adaptable to newer manufacturing technologies and analytical 
techniques. The CGMP regulations ensure that consumers have drugs made 
with the correct ingredients, have been processed in a controlled 
manner to ensure delivery of the safe and effective amount of the 
active ingredient, are free of harmful contamination, and will remain 
safe and effective throughout the labeled shelf life.
    In September 2008, FDA finalized minor changes to its CGMP 
regulations for aseptic processing to incorporate a long-standing, 
enforced Agency interpretation, and there were no significant 
objections to this revision. FDA's ``Guidance for Industry, Sterile 
Drug Products Produced by Aseptic Processing--Current Good 
Manufacturing Practice,'' was last revised in 2004 using a public 
notice and comment process and was well accepted by manufacturers at 
the time of finalization. Note that FDA guidance documents represent 
the Agency's current thinking on a topic. Guidance documents are not 
mandatory and do not operate to bind FDA or the public; alternative 
approaches may be used if the approach satisfies the requirements of 
the applicable statutes and regulations. We are unaware of any changes 
to private or other standard-setting organizations, including the 
United States Pharmacopeia, in a way that imposes a higher-quality 
level on sterile injectable drugs.
    Sterile injectable drug manufacturing operations are vulnerable to 
microbiolog-
ical contamination and require more complicated controls and equipment. 
For many years, due to heightened patient safety concerns, FDA has made 
such drugs a higher-inspection priority, but there have been no recent 
changes to the FDA inspection program for sterile injectable 
manufacturing operations.
    FDA has exercised substantial regulatory flexibility in working 
with firms experiencing CGMP problems to help them identify and resolve 
quality problems and get their drugs back to market as expeditiously as 
possible. Sterile injectable drugs have unique manufacturing and market 
features, which make shortages of these products more likely to occur 
and harder to prevent or mitigate. These include:

     Manufacturing operations are complicated to control and 
more vulnerable to problems that affect safety (e.g., microbiological 
contamination);
     Dedicated manufacturing lines are often required;
     The top three generic injectable manufacturers hold 71 
percent of the market for generics, by volume;
     Most sterile injectables have one manufacturer that 
produces at least 90 percent of the drug (innovator and generic 
combined); and
     ``Just-in-time'' manufacturing and inventory practices 
leave little margin for error.

    Technology has improved over the past decade in the area of sterile 
drug product processing and test methods, but not all advances have 
been widely adopted. Methods to measure air quality and microbiological 
contamination in the manufacturing environment now permit more 
consistent and rapid detection of these types of hazardous 
contamination. Automated methods to detect and quantify foreign 
particles in sterile injectable liquids have also improved over the 
past decade, although such methods are not in common use and are not 
required by FDA. The quality standards in such areas allow for minor 
variations, so improvements in detecting such contamination would not 
necessarily result in a greater number of batch failures or disruption 
to manufacturing capacity.
    The past two decades have also seen improvements in preventing 
objectionable contamination in sterile injectables. Processing methods 
increasingly incorporate equipment and techniques designed to reduce 
contamination--microbiological and other--in sterile injectables. Many 
of the processing advances decrease the amount of operator access--a 
primary source of microbiological contamination--to the critical 
processing areas where vials are open to the environment. FDA has 
encouraged manufacturers of sterile injectables to adopt processing 
methods that improve sterility assurance. Together, these advances 
represent important steps forward in improving the quality of 
manufactured products.

    Question 2. In your testimony you note that of the 127 drugs in 
shortage that the FDA tracked during 2010-11, 43 percent were innovator 
drugs. I assume that by innovator drugs, you mean brand name drugs 
(i.e., drugs that are still under patent). I thought that it was 
interesting that more than two in five drugs in shortage were innovator 
drugs given that we have heard some people say that low reimbursement 
is one of the causes of drug shortages. But if a drug is still on 
patent, its manufacturer can really charge whatever price it needs. 
Does that imply that the causes of drug shortages are more complicated 
than just pricing or reimbursement, and if so, to what causes do you 
attribute the shortages among innovator drugs?
    Answer 2. Yes, the causes of drug shortages are more complicated 
than pricing or reimbursement. The main causes of drug shortages for 
the past 2 years are similar for both innovator (brand name) drugs and 
generic drugs and have included:

     Problems at the manufacturing facility (43 percent of 
drugs in shortage tracked from January 2010-August 2011);
     Delays in manufacturing or shipping (15 percent of drugs 
in shortage tracked from January 2010-August 2011); and
     Active pharmaceutical ingredient shortages (10 percent of 
drugs in shortage tracked from January 2010-August 2011).

    In our experience, the factors that contribute to drug shortages, 
both innovator and generic drugs, generally include:

     Industry consolidation and limited capacity (many 
innovator products are made by contract manufacturers that make 
multiple drugs on the same manufacturing lines and the capacity is 
often limited);
     Difficulty in producing a given drug;
     Quality and manufacturing problems (in some cases 
facilities have not been upgraded appropriately, equipment has not been 
maintained properly, and appropriate quality systems are not in place);
     Unanticipated increases in demand;
     Inventory and distribution practices (which may lead to 
regional shortages); and
     A business decision to discontinue manufacturing the 
product (e.g., in favor of producing a more profitable drug or because 
the product is not profitable).

    Discontinuances caused 8 percent of shortages in 2010 and 2011 and 
have usually involved older sterile injectables that were discontinued 
for business reasons, such as to make production room for a different, 
more profitable product. Economic factors may also influence a firm's 
decision to not maintain their facilities and quality systems 
adequately. For example, manufacturers may continually decrease idle 
time for their manufacturing lines, running them in production mode 
continuously. This practice puts stresses on the production equipment 
and makes little time available for maintenance and repairs.

    Question 3. In your testimony you note that in 4 weeks following 
the issuance of the President's Executive order, you received a sixfold 
increase in notifications from manufacturers. Can you comment on 
whether the types of things that you were notified about were 
materially different from previous notifications? Are you now hearing 
from a broader group of manufacturers?
    Answer 3. Yes, we are hearing from a broader group of 
manufacturers. However, the types of issues that manufacturers notify 
FDA about have not substantially changed and include the following:

     Quality defects or other problems they are experiencing 
that are causing actual or potential shortages;
     Requests for expedited review of changes in manufacturing, 
new manufacturing sites, new suppliers, or other changes;
     Delays or temporary unavailability for any reason;
     Potential shortages for any reason, with requests that the 
normal importation process be expedited for their approved raw 
materials or approved finished goods.

    Question 4. In your testimony you note that the FDA is assessing 
commercial systems that could be contracted to provide ongoing or 
periodic data on sales and distribution of drugs at the wholesale level 
to detect early signals of potential shortages or supply disruptions. 
Can you comment on the FDA's current ability to--at a bird's eye view--
identify and track shortages? Can you further describe efforts underway 
to identify such a commercial system and what types of conversations 
you are having with manufacturers and distributors about such an 
initiative? Do you have an estimate of what types of resources would be 
required to execute such contracts?
    Answer 4. FDA's Drug Shortage Program is currently able to track 
and monitor shortages and potential shortages that are reported to us. 
What we are trying to ascertain is whether there are ways we might 
track and monitor factors that could predict products or facilities 
that are at high risk for leading to drug shortages. To date, we have 
not identified any commercial sources for these types of data. We are 
also aware of academic centers working on development of such data, but 
their efforts have not yet yielded useful information, either. 
Therefore, we have begun to examine our own sources of data, such as 
records of facility inspections and other compliance activities, to 
determine whether any factors alone or in combination are predictive 
enough to serve as a bellwether. This process is extremely labor-
intensive and data must be compiled manually.
    Data from wholesalers and distributors may provide signals that a 
shortage is already underway; however, we prefer to have notification 
of shortages or potential disruptions in supply from the manufacturers 
themselves so that we can offer assistance, before the shortage reaches 
the wholesalers and distributors. Therefore, FDA has continued to 
encourage manufacturers to notify the Agency of any shortage or 
potential disruption in supply. In addition, on December 19, 2011, FDA 
issued an Interim Final Rule (effective January 18, 2012) that expanded 
the circumstances required to be reported to FDA related to 
``discontinuances.''
    In February 2012, FDA issued a Draft Guidance, explaining the 
amendments to the implementing regulations published as an interim 
final rule on December 19, 2011 (effective January 18, 2012). It 
provides guidance to industry on voluntary notification to FDA of 
issues that may result in a shortage or potential disruption in supply 
of a prescription drug or biological product in the U.S. market, 
regardless of whether mandatory notification is required under section 
506C.

    Question 5. In your recommendations you note that the FDA has 
doubled the number of staff to help alleviate drug shortages. Since the 
Drug Shortage Program is currently housed within the Center for Drug 
Evaluation (CDER), can you comment on how this work is funded? Is any 
funding drawn from user fees?
    Answer 5. The additional staff are predominantly on temporary 
assignment from their positions in a number of offices from across 
CDER. This allows us to assess how best to plan for hiring of permanent 
positions, while we address current shortage prevention and mitigation. 
These staff positions are funded in part by user fees and in part by 
appropriated funds.

    Question 6. Can you comment on the broader resource needs at the 
FDA (e.g., technological, infrastructure, or otherwise) for 
appropriately preventing, identifying and tracking, and managing and 
resolving drug shortages? Would it be preferable to establish a 
separate Center for Drug Shortages and directly fund that entity so 
that it can appropriately staff itself and make much-needed investments 
in technology for tracking drug shortages, as identified in the recent 
GAO report?
    Answer 6. The Drug Shortage Program (DSP) has grown from 3 full-
time staff members in 2010 to 11 full-time staff members in February 
2012. DSP coordinates tracking and responses to prevent and address 
shortages. DSP creates a team of experts throughout the Agency for each 
shortage issue. The specific disciplines involved in each shortage team 
vary, depending on the issues involved and can involve physicians, 
chemists, microbiologists, manufacturing and compliance experts, and 
many others. It is important to note that not all shortages can be 
prevented or resolved quickly due to the significant safety and quality 
issues that may be involved. However, in all cases, FDA utilizes a team 
of experts and employs all available tools to prevent and address the 
shortage or disruption in supply.
    Relocation of the DSP outside of CDER would not improve tracking or 
the Agency's response to drug shortages. DSP's presence within CDER 
greatly facilitates its ability to effect collaboration in addressing 
and preventing shortages. There is a large pool of experts within CDER, 
called upon to assist with drug shortages, and DSP engages other 
offices outside of CDER when necessary.

    Question 7. Can you comment on specifically how the Drug Shortage 
Program (DSP) works with others within the FDA, including the Office of 
Commissioner, to ensure that drug shortages are prevented as much as 
possible, and resolved as quickly as possible? What sort of 
coordination and communication occurs between DSP and different 
relevant centers at the FDA, and how regularly does it occur? What 
barriers stand in the way of achieving better coordination and 
communication within the FDA? As Mr. Neas shared in his testimony, the 
generic pharmaceutical industry strongly encourages the establishment 
of a high-level FDA drug shortage management team, which would include 
representation from key agency offices. What do you think about this 
proposal?
    Answer 7. FDA is committed to prevent and address drug shortages. 
CDER works diligently to coordinate across all offices to resolve drug 
shortages expeditiously. DSP works closely with CDER's Office of 
Compliance (CDER/OC), Office of Generic Drugs (OGD), and Office of New 
Drug Quality Assessment in an effort to prevent or mitigate drug 
shortages. Communications between various offices within CDER regarding 
shortages occurs daily. This includes communications between DSP, CDER/
OC, and the review divisions. That said, we know we can always improve 
and we have a Drug Shortage Network in place with key individuals 
assigned to work on shortage issues in each of these offices so that 
timely communications occur within CDER and between CDER and other 
offices and Centers as needed, regarding shortages. CDER also engages 
FDA's Office of Regulatory Affairs (ORA) to coordinate domestic and 
international investigations and inspections as necessary. The Office 
of the Commissioner is also involved to provide policy guidance and 
analytic assistance as needed by CDER.
    Communications between Centers regarding shortages occurs when a 
shortage issue affects more than one Center. This occurs rarely and 
could involve, for example, a manufacturer experiencing quality issues 
that involve veterinary drugs, human drugs, and vaccines. This example 
would involve three Centers in FDA, and the shortage programs in all 
three Centers would work together to coordinate all actions and 
responses to the shortage. The shortage programs in the different 
Centers have shared best practices and continue to do so.
    FDA continues to improve coordination and communication, both 
within CDER and with other parts of the Agency. For example, FDA formed 
an additional working group to concentrate efforts on improved 
communications and coordination by and between ORA district offices and 
CDER. Additionally, we have identified dedicated Drug Shortage 
Coordinators in each ORA District Office. These coordinators will 
facilitate communications with the Center, which, in turn, increases 
the number of early notifications to CDER that firms are planning to 
cease or slow production or are experiencing significant quality 
problems that could lead to a shortage.
    A high-level drug shortage management team is thus already in place 
and includes the Drug Shortage coordination staff as well as a high-
level team of experts from across FDA who possess the specific 
knowledge and skills needed to help address and prevent shortages. The 
current structure allows us the flexibility to adapt to changing 
circumstances, while still ensuring communication and coordination.

    Question 8. Can you comment on how well the FDA has been able to 
develop and institutionalize a comprehensive and cross-center strategic 
plan to address drug shortages that will hopefully, over time, help to 
reduce the number of shortages?
    Answer 8. DSP has an established network of experts involved in 
shortage management and prevention. This team includes individuals from 
across the Center and involves compliance/manufacturing experts, 
chemists, microbiologists, toxicologists, and clinicians who are called 
upon to assist with addressing and preventing shortages. FDA has 
established a Drug Shortage working group to continue to investigate 
the causes and solutions to shortages and to improve communications 
between the various components of the Center as well as between the 
field offices and the Center.
                    questions of senator blumenthal
    Question 1. Dr. Kweder, what type of data is FDA keeping about 
these shortages and their efforts to mitigate such shortages? Why are 
these shortages lasting for, on average, 9 months? What actions are 
taking place during those 9 months to mitigate the shortage?
    Answer 1. FDA developed a database to track the numbers of 
shortages, the types of products in shortage, the reasons for the 
shortages, and the FDA actions taken to help resolve and prevent the 
shortages. FDA re-assesses all shortages and potential shortages daily 
and is doing all that we can within our authority to prevent and 
address shortages.
    Some shortage problems, such as loss of a manufacturing site or 
severe manufacturing or quality problems that could pose a considerable 
risk to patient safety, may take firms significant time to resolve. If 
there are no other manufacturers able to increase production of the 
product quickly (usually due to capacity limitations) or available 
product for import, then more time may be required while the original 
manufacturer works to address the quality problem and bring the product 
back online. However, if there are ways that FDA is able to help, such 
as assisting with a quality problem when there is not a significant 
risk for patients, or expediting review of changes in manufacturing 
sites, suppliers or processes, these issues can be addressed quickly, 
sometimes in days or weeks. An example of this is a potassium phosphate 
injection that had particulate matter in the vials. The firm was able 
to show with data submitted to FDA that the particulate matter could be 
successfully removed by a filter and the drug was able to be shipped 
with the filter and instructions for pharmacists to use the filter with 
the drug to prevent risks for patients. The review of this issue was 
completed within days after receiving the proposal from the firm.
    In cases where a long-term shortage is anticipated, FDA searches 
for firms that manufacture drugs for foreign markets and would be 
willing and able to temporarily import a drug that could help meet 
critical patient needs. Temporary importations have occurred for nine 
drugs over the past 2 years. Five of those drugs are currently being 
temporarily imported. FDA evaluates the drug available in the foreign 
market to ensure there are no significant safety problems for U.S. 
patients and that it is made in a manufacturing site that meets FDA 
standards. FDA is not always able to find a firm willing and able to 
import to address a shortage; however, it is something that we explore 
when there is a long-term shortage of a critically needed drug.

    Question 2. Dr. Kweder, what is the relationship between shortages 
in the United States and abroad? Are the same shortages felt 
internationally, generally? Or is the United States in a unique 
position?
    Answer 2. FDA is working closely with other regulatory authorities 
in Europe, Australia, the United Kingdom, and Canada on existing drug 
shortage problems, as drug shortages are not unique to the United 
States, but are a global problem. For example the recent Doxil shortage 
has affected Europe, Canada and the United States. During our 
discussions with international regulatory agencies, crucial information 
regarding the availability of important drug products and potential 
alternate facilities is shared. Additionally, when quality problems, 
manufacturing constraints, or limited production capacity trigger a 
shortage, FDA and other regulatory authorities exchange information 
regarding the issues identified or leading to the drug shortage. These 
regulatory authorities then communicate, when necessary, with industry 
to explore options that will best address patient needs.
                       questions of senator enzi
    Question 1. What is the average and range for how long it takes to 
get FDA approval for a manufacturing facility change? Please provide 
specific examples where FDA met the 6-month goal.
    Answer 1. The 6-month goal you reference relates to applications 
for manufacturing facility changes that require prior approval. Under 
the Prescription Drug User Fee Act (PDUFA), FDA committed to reviewing 
90 percent of such supplements within 6 months. In fiscal year 2011, 
FDA reviewed 98 percent of these supplements in 6 months, exceeding the 
goal agreed to with industry.
    FDA does not track the specific data you requested; however, the 
time it takes for approval of a manufacturing facility change will 
depend on several factors:

     whether the new site has ever been inspected;
     whether the new site has any quality problems that have 
been identified;
     location of the site, since an overseas inspection may 
take longer to schedule due to current resource constraints;
     whether the site makes similar drugs for the U.S. market;
     whether the application for the change contains all of the 
information needed to review the change (sometimes applications are 
missing essential data).

    Depending on the type of facility change, sometimes these changes 
can be submitted as ``change being effected (CBE)-30 supplements,'' 
which means that 30 days after the submission, the firm can release the 
new production from the new site unless FDA objects. A recent example 
is a firm that needed a new site to increase supplies of a cancer drug 
and two other drugs in shortage. We accepted the site addition as a 
CBE-30 supplement because the firm was recently inspected, had no 
quality concerns, and makes similar drugs for the U.S. market.
    For drugs in shortage or for those with potential for shortage, FDA 
works closely with the firms so that their applications and inspections 
can be expedited.

    Question 2. What percentage of manufacturing changes requires prior 
approval by the FDA, and how does that compare with the EU?
    Answer 2. FDA does not compare and/or tally the different types of 
manufacturing changes in this manner. However, while not an exact 
match, the requirements for filing manufacturing changes in the 
European Union (EU) are similar to the FDA. Not all changes require 
prior FDA approval (for example, the CBE-30 supplements discussed 
above) and for those that do, any shortage related applications--
requiring prior approval or not--are expedited.

    Question 3. Please identify the specific drug shortages you have 
prevented and describe how you did it. How do you define a prevented 
shortage?
    Answer 3. FDA regularly intervenes in potential shortage situations 
to help prevent or minimize shortages. Since October 31, 2011, when the 
President issued his Executive order, FDA has worked closely with 
manufacturers to prevent 114 drug shortages.

     Of the drugs involved, 86 were manufactured by one firm. 
The firm had lost the supplier that it used for material in the 
container for these products. FDA worked closely with the firm to 
quickly qualify and approve the new supplier and was able to prevent 
shortages of the affected drugs.
     The other 28 potential shortages involved different causes 
and solutions:

          Expedited Importation (two potential shortages): 
        Impending shortages of two drugs were averted by expediting the 
        importation of these approved drugs from outside the United 
        States. Both of these approved drugs are manufactured overseas 
        for the U.S. market. The U.S. inventory levels of these drugs 
        were insufficient to meet demand. With respect to one of those 
        drugs, there was an unanticipated increase in demand and the 
        manufacturer needed FDA's assistance to respond to that demand. 
        In the second case, a manufacturing delay caused a reduction in 
        supply. In both cases, FDA expedited the importation process so 
        that the drugs could be imported quickly to avoid a shortage.
          Quality Problems (14 potential shortages): During the 
        same time period, FDA prevented 14 of these potential shortages 
        by rapidly addressing quality problems.
          One potential shortage involved a firm that had a 
        slightly out-of-specification test result for their finished 
        drug product, but which did not represent significant risk for 
        patients. Therefore, FDA allowed the firm to ship the finished 
        product in inventory, while they corrected the problem for 
        future lots.
          The second potential shortage resulted from a quality 
        issue with the glass used for syringes for use with a 
        particular drug. With guidance from the Agency, the firm was 
        able to do additional testing to remove all of the defective 
        syringes from the batch, before releasing the product to the 
        market.
          The third potential shortage involved a quality 
        problem at the manufacturing site of a manufacturer that makes 
        sterile water used to dilute injectable drugs that are in a 
        powder formulation and that need to be reconstituted before 
        use. FDA determined that the quality issues did not have an 
        impact on the sterile water vials, so we permitted the firm to 
        release the drug with the sterile water vials while it worked 
        to correct the problems at the manufacturing facility.
          The fourth potential shortage involved glass 
        particles in vials of a medically necessary drug. Working with 
        the Agency, the firm was able to show that pharmacists could 
        successfully filter the drug to remove the glass if they were 
        provided with adequate instructions, and that there would not 
        be a significant risk to patients from the filtered drug. FDA, 
        therefore, permitted the firm to release the drug with approved 
        instructions to filter the drug before use.
          The remaining issues involved general systems 
        problems at manufacturing sites that could have had an impact 
        on the safety or quality of the drugs made in the facilities. 
        FDA worked closely with the firms, and they were able to take 
        additional steps to ensure that there were no significant risks 
        for patients due to the issues and that the drugs could be 
        released to avoid a shortage while the firms corrected the 
        problems.
          Expedited Review of Supplements (nine potential 
        shortages): These involved firms that needed new facilities, 
        new suppliers, and/or changes to their product formulation 
        approved to avoid shortages. For example, one firm shut down 
        its original manufacturing site and opened a new facility. As 
        required by law, the firm submitted a ``supplement'' to its 
        application to seek FDA approval to manufacture the drug 
        product at the new facility. FDA expedited the inspection of 
        the facility and approval of the supplement, completing review, 
        inspection, and approval in 60 days--well in advance of the 
        PDUFA goal of 6 months--to avoid a shortage of the product.
          Increased Production (three potential shortages): 
        With respect to the remaining three potential shortage 
        situations, FDA worked with alternative manufacturers of drugs 
        that were facing potential shortages to ramp up production to 
        cover the anticipated shortfall. In these situations, FDA 
        learned that the manufacturer in question was facing problems 
        (two involved quality problems and one involved a product 
        recall). As soon as FDA became aware of potential shortages of 
        the products in question, we initiated an outreach program and 
        worked with other manufacturers to avert the shortage.

    Question 4. How many more notifications do you expect with the 
change in the IFR, and how do you define an action that may precipitate 
a shortage?
    Answer 4. The Interim Final Rule (IFR) defined the term 
``discontinuance'' in FDA's regulations to include both temporary and 
permanent interruptions in the manufacturing of a drug product, if the 
interruption could lead to a disruption in the supply of a product. The 
IFR also clarified the definition of the term ``sole manufacturer'' to 
refer to an applicant that is the only entity currently manufacturing a 
drug product of a specific strength, dosage form, or route of 
administration for sale in the United States, whether the product is 
manufactured by the applicant or for the applicant under contract with 
one or more different entities.
    We anticipate an increase in notifications as a result of the IFR. 
It is difficult to predict how many additional notifications will occur 
with the change in the IFR; however, FDA is continuing to see an 
increased number of notifications in 2012 from manufacturers, some of 
which are a direct result of the IFR. The earlier FDA learns of a drug 
shortage, the more effective FDA can be in helping to minimize the 
impact on patients and health care professionals. For this reason, 
legislation requiring early notification of impending supply 
disruptions and discontinuation of drugs is a necessary tool in 
mitigating or preventing shortages.
                        question of senator burr
    Question. How many of the drugs recognized to be in shortage by the 
FDA are drugs for which generic drug applications are currently pending 
review by FDA? How many of these generic drug applications for drugs 
currently experiencing a shortage, or that have experienced a shortage 
over the past 5 years, have been pending review past the 6-month 
statutory review timeframe?
    Answer. We are not aware of any such applications. FDA's OGD 
routinely monitors the queue of generic drug applications and takes 
action when an application involves a product that may help prevent a 
shortage or resolve one. With respect to new applications, OGD 
regularly monitors all incoming applications to determine whether any 
are for drugs that are facing a shortage situation. When we identify an 
application relating to a drug in shortage, we designate the 
application for expedited review and proceed with the review on that 
basis. Notwithstanding expediting the review of applications for 
generic products that may help alleviate a drug shortage, all 
applications still must meet FDA's standard for approval.
    There are reasons why a generic application associated with a 
shortage drug could and would remain ``pending'' after a successful 
review and inspection. In some cases, an application cannot be granted 
final approval because the brand in shortage holds a valid patent that 
the generic-application sponsor has chosen not to challenge. In that 
case, FDA cannot approve the generic application until the patent 
expires. Another issue that could affect the review time of a drug in 
shortage is that it is not always possible to know ahead of time that a 
product will be in short supply. As mentioned above, new applications 
relating to drugs in shortage are designated for expedited review, but 
it is possible that, prior to a particular drug going into shortage, an 
already existing application would be pending with FDA and 
appropriately proceeding through the queue. This may be why 
applications appear to be pending for some period of time for drugs on 
the shortage list, especially if the drug was recently added to the 
shortage list.
                       questions of senator hatch
    Question 1. How does the Office of Drug Shortage work with the 
Office of Compliance? Do they consult one another before taking action 
to relieve or mitigate shortages? Do they consult one another before 
taking enforcement actions that could lead to shortages?
    Answer 1. Staff in DSP and CDER/OC communicate almost on a daily 
basis to discuss potential and actual shortages. The Office of Drug 
Security, Integrity, and Recalls (ODSIR), Recalls Coordinating Branch 
(RCB) within CDER/OC, is the liaison to DSP. CDER/OC reports weekly to 
DSP a summary of all pending CGMP regulatory cases.
    DSP is notified prior to a CGMP enforcement action, such as a 
Warning Letter, seizure, and injunction, to help evaluate and/or 
mitigate the impact such actions may have on medically necessary 
products. In addition, if severe violations are identified during an 
inspection, the investigators contact CDER/OC, who in turn, will notify 
DSP of the violations and have a market impact evaluation done, unless 
it is obvious that the products affected are not medically necessary. 
The potential for shortage is evaluated along with the impact the 
shortage would have on patients, as well as any risks involved with the 
drugs in question. Decisions about specific regulatory compliance 
actions take into account their potential impact on availability of 
drugs, the medical necessity of those drugs in clinical practice, and 
the level of risk involved with a firm's manufacturing and CGMP 
deficiencies. In all cases, FDA works closely with the firm(s) to 
minimize any risks while working to restore and maintain safe supplies.

    Question 2. How many of the products in shortage were provided with 
a warning letter from the Office of Compliance prior to being in 
shortage? Of those products, how many warning letters were specifically 
regarding the safety of the product sold on the market?
    Answer 2. This information is not readily available, although we do 
know that 43 percent of shortages are related to problems at the 
manufacturing facility. We are conducting a comprehensive, 
retrospective review to see if manufacturers of products in shortage 
received a Warning Letter prior to the shortage. This is resource- and 
time-intensive. We will share the outcome of our review once it is 
available.

    Question 3. Is it accurate to say that FDA inspects Contract 
Manufacturing Organizations when the organization enters into a new 
contract with an innovator to manufacture a particular product? If so, 
would it not be better to provide a general quality system review when 
requested by the CMO as opposed to waiting for the organization to 
enter into a contract? It is my understanding that manufacturers prefer 
contracting with CMOs that are already FDA-approved, many of which are 
abroad. If the CMO is pre-approved prior to the contract, could that 
not help to alleviate shortages by increasing U.S. manufacturing 
capacity?
    Answer 3. FDA inspections of manufacturing sites are prompted by 
the site's registration with FDA, which is required when a site begins 
to manufacture and distribute drugs and when a site is identified in a 
new drug application. For drug manufacturing sites that are listed with 
FDA, we perform routine inspections and, where appropriate, we will use 
information from a routine inspection to waive a pre-approval 
inspection before additional drugs are made at the facility. In other 
words, we already consider a listed site's compliance with CGMPs--and 
each CGMP inspection must cover the site's quality system--in deciding 
whether to approve a manufacturing site for additional application drug 
products. If we were to inspect before the time a contract is signed, 
this could result in unnecessary site inspections, for example, if a 
site is not, in fact, named in an application.

    Question 4. Do you believe the proposal offered by the Generic 
Pharmaceutical Association will have a significant impact on drug 
shortages? Do you believe the FDA is already filling the role of the 
third party entity they suggest establishing for purposes of 
coordination? If not, how is it different?
    Answer 4. FDA has met with Generic Pharmaceutical Association and 
will continue to work with them on shortages. We recently heard some 
initial information from them about their proposal, the Accelerated 
Recovery Initiative. There is not yet enough information provided to 
FDA to make a determination about the impact this proposal could have 
on drug shortages.

    [Whereupon, at 12:44 p.m., the hearing was adjourned.]

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