FTC, HHS Launch Investigation into Role of GPOs, Wholesalers in Ongoing Generic Drug Shortages

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The Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS) have launched an examination into the practices of group purchasing organizations (GPOs) and drug wholesalers—middlemen that the agencies stated may be contributing to ongoing shortages of generic drugs. Both agencies are seeking public comment and information on the contracting practices, market concentration, and compensation of GPOs—who broker drug purchases for hospitals and other healthcare providers—and wholesalers—who purchase drugs from manufacturers to distribute to providers.¹

“For years Americans have faced acute shortages of critical drugs, from chemotherapy to antibiotics, endangering patients,” FTC Chair Lina M. Khan said in a press release. “Our inquiry requests information on the factors driving these shortages and scrutinizes the practices of opaque drug middlemen. We look forward to public input as we assess how enforcers and policymakers can best address chronic drug shortages and promote a resilient drug supply chain.”¹

The FTC and HHS plan to investigate whether manufacturers, GPOs, and drug wholesalers are complying with the legal obligations under the Clayton Act and the Robinson-Patman Act; the extent to which protections for GPOs via the Federal Anti-Kickback Statute are impacting shortages, market concentration, and contracting practices; how market concentration among GPOs and drug wholesalers are affecting smaller health care providers and rural hospitals; whether GPOs and drug wholesalers have disincentivized suppliers from competing in generic drug markets; and how the prevailing GPO compensation model affects generic manufacturers and other suppliers through practices such as rebates, chargebacks, and administrative fees.

The move follows a series of actions on the legislative front aimed at mitigating ongoing drug shortages. In November 2023, US President Joe Biden announced a plan to bolster supply chains critical to national interests. Biden also invoked the Defense Production Act to enable investment in the domestic manufacturing of essential medicines.2 Further, Biden established the Council on Supply Chain Resilience to ensure stability across US supply chains and to ramp up domestic production of various medications.³

The presidential actions followed a letter sent by the House Committee on Oversight and Accountability to the FDA requesting information as to how the agency was managing complex supply chains and drops in domestic manufacturing related to drug price controls included in the Inflation Reduction Act. The committee requested a briefing to evaluate the FDA’s response and mitigation strategies to improve and sustain the supply of medications available to Americans.³

According to an IQVIA report released in November 2023, there were approximately 130 active shortages through June 2023 and over the past five-and-a-half years, there were 160 shortages of new molecules, of which only 51 were resolved. More than half of the current shortages were ongoing for more than two years.⁴

These shortages largely affected generic and injectable medications, which represent 84% and 67% of shortages, respectively. Of the approximately 132 drugs in shortage cited by the report, 120 were generics.⁴

“When you’re prescribed an important medication by your doctor and you learn the drug is out of stock, your heart sinks,” said HHS Secretary Xavier Becerra, in the release. “This devastating reality is the case for too many Americans who need generic drugs for ADHD, cancer, and other conditions. [The] announcement is part of the Biden-Harris Administration’s work to tackle health care monopolies and lessen the impact on vulnerable patients who bear the brunt of this lack of competition. [The] initiative is just one more action by HHS to best address shortages of generic drugs.”¹

The public will have 60 days to submit comments at Regulations.gov.

References

1. FTC, HHS Seek Public Comment on Generic Drug Shortages and Competition Amongst Powerful Middlemen. Federal Trade Commission. February 14, 2024. Accessed February 15, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/02/ftc-hhs-seek-public-comment-generic-drug-shortages-competition-amongst-powerful-middlemen

2. Remarks by President Biden on New Actions to Strengthen Supply Chains, Lower Costs for Families, and Help Americans Get the Goods They Need. The White House. November 27, 2023. Accessed February 15, 2024. https://www.whitehouse.gov/briefing-room/speeches-remarks/2023/11/27/remarks-by-president-biden-on-new-actions-to-strengthen-supply-chains-lower-costs-for-families-and-help-americans-get-the-goods-they-need/

3. Comer J. McClain L. Letter (PDF) to FDA Commissioner Robert Califf. November 2, 2023. Accessed February 15, 2024.

4. Aitken, M., et al. Drug Shortages in the US 2023: A Closer Look at Volume and Price Dynamics. IQVIA Institute for Human Data Science. November 15, 2023. Accessed February 15, 2024. https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/drug-shortages-in-the-us-2023/drug-shortages-in-the-us-2023.pdf?utm_medium=email&utm_source=Eloqua&utm_campaign=2023_Drug_Shortages_Report_INSTITUTE_IS