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The Obama Watch
Obama Orders Drug Shortages
He wants increased production of life-saving drugs while looking to punish any price increases. Good luck to us all.
With much fanfare and media attention, President Obama signed an executive order instructing the FDA to step up work to reduce current drug shortages and protect consumers. It’s hard to argue with exercising presidential leadership to ensure cancer patients don’t die waiting for drugs that could save their lives. The problem is the executive order will aggravate the conditions causing the shortage.
The executive order notes, “An important factor in many of the recent shortages appears to be an increase in demand that exceeds current manufacturing capacity.” So the order directs the FDA to look for and report on potential drug shortages earlier and more regularly, speed up the review of applications needed to expand or start production and tell the Justice Department when about “possible instances” of collusion or price gouging.
In other words, the same companies the President is encouraging to increase production will also be suspected of criminal activity if they work together or raise prices in ways that — to FDA or DOJ lawyers — seem illegal. The only way to reduce your risk of being prosecuted or investigated is to keep prices where they are or ask permission to raise them first.
Ironically, the drug shortages the president wants to address were caused by a similar desire to prevent price gouging in 2003. Former Obama health adviser Ezekiel Emanuel recently noted:
The Medicare Prescription Drug, Improvement and Modernization Act of 2003… required Medicare to pay the physicians who prescribed the drugs based on a drug’s actual average selling price, plus 6 percent for handling. And indirectly — because of the time it takes drug companies to compile actual sales data and the government to revise the average selling price — it restricted the price from increasing by more than 6 percent every six months.”
The act had an unintended consequence. In the first two or three years after a cancer drug goes generic, its price can drop by as much as 90 percent as manufacturers compete for market share. But if a shortage develops, the drug’s price should be able to increase again to attract more manufacturers. Because the 2003 act effectively limits drug price increases, it prevents this from happening. The low profit margins mean that manufacturers face a hard choice: lose money producing a lifesaving drug or switch limited production capacity to a more lucrative drug.”
The result is clear: in 2004 there were 58 new drug shortages, but by 2010 the number had steadily increased to 211. (These numbers include noncancer drugs as well.)
Indeed, the government report on the cause of the shortages the President mentions in his executive executive order found that the greatest shortages and the steepest decline in product are among the drugs whose prices have dropped since 2004. Similarly, in the 1990s when the price of vaccines bought by the government was capped, there was a shortage of shots for childhood diseases. Once the price caps were lifted product rapidly increased.
The simple solution to the shortage problem is to remove the price controls that already exist and not adopt any policies that would increase government’s role in setting prices. Prices should go up. The time and cost required to produce more drugs could go down by allowing companies to pool resources, production lines, share inventory, etc. That’s what sped up and cut the expense of producing anti-flu medication in response to the possibility of bird flu pandemic in 2008. As a temporary measure, the Department of Health and Human Services could establish a special code for products in short supply to speed up reimbursement at rates reflecting the urgency of the situation.
Instead, as noted the President wants the FDA to monitor companies for evidence of collusion and price gouging. Additionally, the administration wants to impose price controls and rebates on all medications the government pays for. That would force a reduction in the price of injectible drugs other than the medicines for cancer and infections that are already in short supply. Finally, Obama wants to reduce the effective patent life of biotech drugs from 12 to 7 years. That could create a shortage of life saving drugs in the future relative to the demand.
While the President’s effort to resolve the shortage is laudable, his executive order will make the shortage worse. And his proposal to extend price controls and reduce patent life on all other drugs now and in the future will ensure our nation faces a famine of pharmaceuticals for years to come.
About the Author
Robert M. Goldberg is vice president of the Center for Medicine in the Public Interest and founder of Hands Off My H ealth, a grass roots health care empowerment network. His is new book, Tabloid Medicine: How the Internet is Being Used To Hijack Medical Science For Fear and Profit, was published last month by Kaplan.
Letter to the Editor View all comments (33) | Leave a comment
More Articles by Robert M. Goldberg
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Bill Hussein O'Stalin| 11.4.11 @ 7:15AM
There is one area where we don't have to worry about shortages.
Idiotic government officials and idiotic regulations.
LindaF | 11.7.11 @ 6:05AM
Funny. Or, sadly, not funny.
I'm torn between believing that these people are clueless, or malevolently destroying our country.
It probably doesn't matter - the effect is the same.
Doctor_X| 11.4.11 @ 7:16AM
With executive orders and a know-it-all president who needs congress and economist? How is this any different than the Communist dictators and central planning of the former USSR?
Appleby| 11.4.11 @ 7:29AM
Look for floods of people coming up here to Canada to deplete our drug supply and leave us locals without essential medications. They will pass us on our way to buy groceries for 50% less than our cartel-controlled foodstuffs cost here in Ontario.
Socialism cannot work, as even the Occupy Fantasy Camps are discovering, because when enough freeloaders pile on board, the wagon breaks down and the horses run away.
Peter Yankoff| 11.4.11 @ 9:35AM
Most of your drugs come from US if I am not mistaken. If supply is short you will be too.
Maxwell| 11.4.11 @ 7:44AM
I just have one simple question, not that is matters but I will feel better if I ask. What was Barry's grade in Economics 101?
Moe Blotz| 11.4.11 @ 8:22AM
Our Barry exhibits no knowledge of ever having taken any economics courses, or US history courses either. Maybe he did study such curricula as an undergraduate and scored well on tests, but immediately forgot it all whilst smoking pot or snorting other pharmaceuticals.
Mike Hawk| 11.4.11 @ 9:38AM
Obama's economics all come from Marx and Saul Alynski.
WhiteBikerTrash| 11.4.11 @ 5:32PM
Barry never took Econ 101
He got a grade of "Present" in Econ 98
He quit paying attention when the cost of pot went up 25% and the quality went up 40%. That was when he felt he knew everything about Economics.
Nighthawk| 11.4.11 @ 8:52AM
Again, I ask, where is the evidence that President Obama is BRILLIANT? Time and time again he demonstrates that he has no clue. About anything.
Consertive View| 11.4.11 @ 9:34AM
Nighthawk, of course he is brilliant. He has brilliantly screwed up just about everything he has done. His health care plan is a piece of brilliant failure. His job plan, a piece of brilliance as he goes on spending us further into debt. His choice of advisors tops brilliance and moves into the sphere of absolute nova bright intellegence. I mean, who else would have chosen Eric Holder? So let us not cast doubts upon his brilliance, he has proven it all too often. Let us see it shine as he single handly pushes America, and indeed the entire world, into a new period of economic dark ages. Remember the slogan for his 2012 election, "Let's go for broke, re-elect President Obama."
Moe Blotz| 11.4.11 @ 10:01AM
Flame on Barry, what?
MizGeek| 11.4.11 @ 9:50AM
Again, the problem is government meddling in the free market. As for our "president", his objective is to bring America to it's knees so he can rescue us by imposing more government control. Makes me sick.
daddio| 11.4.11 @ 9:55AM
Once again the law of unintended consequences bites us in the ass!
Michael Tomlinson| 11.4.11 @ 10:07AM
Obama doesn't need death panels he is death.
Dixie Pixie| 11.4.11 @ 10:56AM
I was talking to a local pharmacists the other day.
He told me the government had changed the rules on a popular generic drug from a cost plus format to a defined reimbursement rate.
The reimbursement rate was 8 dollars per 1 thousand dollars sold or a razor thin profit margin of 0.8%.
At that rate it is impossible to keep the shop open and the only way he is surviving, is other drugs are paying the bills to keep the lights on.
With Obama in charge we will get a “Perfect” governmental plan which will insure “Social Justice” and “Low Cost of Free Drugs for All”.
The only flaw in ObamaPharm is it will no longer be worth the time, cost and effort to supply, stock or distribute Obama's pharmaceutical utopia.
The result will be no drugs for anyone but Obama's marvelous intellect will come up with a solution for that just as so as he, the family and 2000 of his close friends come back from a taxpayer paid vacation.
C..V..May I suggest a slight change to “Obama has a “Nova Bright Mal-intelligent” as Obama has a talent for massive screw-ups that he portrays as works of a “Super Genius”.
Warrior | 11.4.11 @ 3:55PM
What I see as being missed here by the author and others is that this just another Obama head fake. He is a pathological liar, which seems to be glossed over by every writer at this site. Just look at what "Big Pharma" agreed to in the days leading up to the passage of Obamacare and you will see why the shortages and threats are no more than political theater.
Dixie Pixie| 11.4.11 @ 8:33PM
You have a good point Warrior.
However I think it goes beyond being a pathological liar to a form of mental illness in which Obama believes his spoken words change physical and political reality.
Like a Hogwarts wizard, he thinks, has such a force of authority that a properly spoken sequence of words will change reality into whatever he wants it to be just like casting a wizards spell.
Just one example, Obama told the national press corps that it was the Republicans that caused the credit downgrade when they did not automatically increase the credit limit at his request,
Anybody who went to the credit agencies websites could plainly read that it was out of control governmental spending that was the problem and an increase in the debt limit would cause a downgrade.
What Obama said was the exact opposite of the easily determined facts written in black and right.
No common liar would ever make such a simple mistake.
It takes outright insanity to try to re-frame the debit limit debacle onto the Republicans and expect the public to believe it just because Obama says it is so.
With Obama it is a continual casting of word spells that creates the political and physical reality which pleases Obama.
Obama completely believes what he said is true just because he said it, so it must be true.
He simply refuses to see any fact to the contrary as that would break his self-created web of word-spells and blow his fantasy world apart.
What are your thoughts?
Warrior | 11.4.11 @ 11:31PM
We agree. In this situation he simply casts blame to the greedy drug companies. He threatens justice department action that will never happen and with his blind media support he takes the morale high ground in the hearts and minds of the true believers and lemmings. The liberal death spiral continues. Government creates the problem and then in response the government creates more laws to solve the problem which only makes the problem worse, which necessitates more laws...
Occam's Tool| 11.6.11 @ 5:07PM
Obama is a traitor to this country. Pure, simple, and EXPANSIVE. It is not a limited case of treason, like, say, Benedict Arnold's. No, it covers a wide range of evil, hurtful things.
Consertive View| 11.4.11 @ 11:41PM
Change accepted
TrueBlue| 11.4.11 @ 11:36AM
I guess that's one way to get population control laws passed...
LiveFreeOrDie| 11.4.11 @ 12:26PM
"While the President's effort to resolve the shortage is laudable, his executive order will make the shortage worse."
Laudable? I'd say laughable, or worse. This man has yet to do ANYTHING that isn't 100% in his own interests so what's the rub?
John R. Graham | 11.4.11 @ 12:38PM
Best explanation I've yet read about how the federal government caused the shortage. When i first read the executive order I had to laugh. He might as well write an EO directing the Federal Aviation Administration to force Boeing to make more dreamliners.
Ron| 11.4.11 @ 1:11PM
Apparently, NerObama, the Agitator-In-Chief believes the Food and Drug Administration is to make sure drugs and food are pure...What a moron!!!!!!
Nite| 11.4.11 @ 5:55PM
Obama really shows his intellect, huh? (sarcasm)
POST American| 11.4.11 @ 11:15PM
----Speaking of DOPE and Big Farma
--er' we meant 'Pharma'
"Do you know, years ago, they did
a study on people who NEVER saw
doctors their whole lives. They examined
them after they died and discovered
they'd had and shaken cancer several
times during their lives without even knowing
it. The study was briefly mentioned on
the 'news' and NEVER talked about again."
-JAY WEIDNER
(Documentary Film-maker/Scholar)
---TRUE---
SO------Keep a goin' kiddies -keep a goin'
-------------Viagra, CHEM-trails n' DOPE-rah
------------------------Just keep a goin' . . .
Nick| 11.5.11 @ 2:09PM
Don't forget about our "precious bodily fluids," General Ripper.
shipley130| 11.5.11 @ 2:15AM
How about building more factories to make medicine. Geeze, job creation.
Occam's Tool| 11.6.11 @ 5:09PM
An example of a perfect health system that Obama would love is New Zealands. The pharmaceutical companies do NO research there, which means there are NO cutting edge therapies for Lung Cancer among the human group with the highest lung cancer rates in the world, for example (the maori).
Jack London| 11.6.11 @ 5:50PM
There are no drug therapies for advanced lung cancer for anyone that do very much. The Maori have high smoking rates - public health campaigns to stop them smoking would be a far greater benefit but that would be 'nanny state' wouldn't it.
And no drug company is ever going to invest in a small subtype population with little money.
As for the drug shortages the article here shows no understanding of the real issues. But that's usual because AmSpec is not about facts but about the unfettered pursuit of exploitation.
Tenn Slim| 11.7.11 @ 7:48AM
Again, the Federal Price control mechanism is revealed as faulty.
The 2 aspects are incompatible. Control vs Free Market supply and demand. The mix is like oil and water.
A good dose of Common Sense is required. IF a drug is vital, then COOPERATIVE CONTROL mechanisms are the answer. Just as a good detergent mixes grease and water, so would this approach.
end
Semper FI
D Gibbons| 11.17.11 @ 5:41PM
The reason the President wants the FDA to monitor companies for evidence of collusion and price gouging is that when a drug shortage occurs, this is the natural tendency of drug manufacturers as well as gray markets that tend to spring up for a drug when it is in short supply. Mr. Goldberg has somehow failed to understand or acknowledge this practice. Pharmacy benefits management companies play just as large a role in imposing price controls and rebates on all medications as government programs do. This is simple fear mongering on behalf of pharmaceutical interests.