Over the past few years, drug shortages have become more well publicized; unfortunately, the underlying causes for these shortages have not been as well publicized. This has allowed lobby groups to set the narrative in a way that distorts the truth. One such group, Physicians Against Drug Shortages led by Phillip Zweig, has implicated healthcare group purchasing organizations (GPOs) as the underlying cause of all recent drug shortages and even blames them for the rise of HIV/AIDS.
Just what is a GPO, and is there any evidence to support this claim? Healthcare group purchasing organizations are entities that leverage their collective purchasing power to acquire drugs from manufactures at a discount. Much like a big-box retailer, GPOs buy in bulk and pass the savings onto the purchaser, hospitals. This savings then trickles down to the patient in the form of reduced drug costs. GPOs track data on drug manufacturing and adjust prices accordingly to manage the overall supply of a drug in an attempt to prevent shortages. GPOs have been operating in the US for over a century and work to increase competition in the drug manufacturing market by entering into voluntary contracts with hospitals. The cost savings and business practices of GPOs have been validated by lawyers and regulators from the Department of Justice and the Government Accountability Office as well as Supreme Court.
The real causes of drug shortages have been thoroughly detailed by the US Food and Drug Administration. Interestingly, the main three causes for drug shortages were the result of problems in the drug manufacturing process and not the control of the drug supply by GPOs as lobby groups have argued. The FDA found that 91% of drug shortages were caused by: quality control issues in the manufacturing process, shortages of raw materials, and manufacturing delays. The other nine percent were caused by increases in demand, closing of manufacturing locations, and discontinuation of certain drugs.
One thing that has not been well publicized is that the FDA, with the help of manufacturers, GPOs, and hospitals, have reduced the number of drug shortages by 90% in just the last six years alone. Furthermore, they have consistently averted over 100 additional drug shortages in each of those years through proper communication and management throughout the entire supply chain.