What causes drug shortages?

Quality concerns, financial incentives, and increased demand are usually to blame.
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Hannah Minn

· 4 min read

Drug shortages are nothing new for the healthcare industry, but the Covid-19 pandemic caused a wave of new shortages—and with it came increased public attention.

That’s why these days, it can seem like new shortages are creeping up everywhere, from Adderall to weight loss drugs like Ozempic and Wegovy.

So, what causes drug shortages? Turns out, a lot of things.

“Every drug shortage is unique,” according to Craig Burton, SVP of policy and strategic alliances at the trade group Association for Accessible Medicines, which represents generic drugmakers.

But there are a few factors that pop up consistently: quality concerns, financial incentives, and increased demand.

Quality control

Though brand-name drugs like Adderall, Ozempic, and Wegovy get a lot of attention when there’s a shortage, the generic, low-cost injectable drugs make up the majority of shortages, according to Michael Ganio, senior director of pharmacy practice and quality at the American Society of Health-System Pharmacists.

The most common reason behind generic injectable drug shortages is quality issues at manufacturing plants, said Erin Fox, associate chief pharmacy officer of shared services at the University of Utah Health in Salt Lake City.

Making injectables is a very complex process that requires more testing than pills or solid dosage drugs, Ganio said. The FDA also heavily regulates the manufacturing of these drugs, which means there are a ton of protocols plants have to follow.

The combination of complexity and heavy regulation means there’s lots of room for mistakes, too. Something as seemingly small as using the incorrect number of vials when making a batch of an injectable drug could delay the manufacturing process, Ganio said. Other issues could be a piece of equipment not working properly or a documentation error occurring during sterility testing.

If the FDA inspects a manufacturing plant and finds a quality error, it could require a drug recall or a slew of changes that prompts the manufacturer to shut the plant down, and “suddenly we have a major producer of a drug that’s no longer in the market,” said Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota.

FDA mandates that result in plant shutdowns are extremely rare, but recalls are fairly common—and they can have major consequences.

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In 2021, the FDA found that a Johnson & Johnson plant making Covid vaccines didn’t follow proper manufacturing protocols and mandated the plant to throw out 15 million vaccine drug product doses, the AP reported. The plant shut down based on the FDA’s report.

A not-so-lucrative business

Another common factor in generic drug shortages is that there’s no money in making generic drugs, Burton said.

“Over the years, the price of generics have been depressed to artificially low levels, causing manufacturers to exit the market,” Burton said.

In February 2023, Akorn Pharmaceuticals, which used to make 75 generic drugs, shut down its manufacturing plant due to financial struggles.

Brand-name drugmakers don’t face the same financial problems. 

“Because brand-name products have that higher profit margin, they rarely go into shortage,” Fox said. “The companies have a lot of incentive to make sure that their manufacturing has a lot of redundancies, backup plans, buffer stock.”

Just in time

Because drugmakers don’t make any money on generics, they tend to make “just enough” to meet market demand, Fox said. So if demand increases, there’s no extra capacity.

That’s called “just-in-time” inventory, according to Schondelmeyer. Drugmakers typically only make just enough product to last a few days or a few weeks, he said, which means they’re more likely to be unprepared for huge changes in demand.

For example, the early months of the pandemic resulted in high demand for the same drugs, catching manufacturers off guard. Ergo, many drug shortages occurred.

The Wild West 

Over-the-counter (OTC) drugs are a whole different world.

OTC drugmakers aren’t required to report shortages the way prescription drugmakers are, Ganio said, so there’s no reliable way of knowing how many OTC drugs are in shortage.

Fox called OTC drugs “the Wild West.”

“I think people think there’s a lot more FDA regulation of over-the-counter products, when there really is almost none,” Fox said. “There’s just no good tracking mechanism.”

Tracking OTC drug shortages would also be extremely complex, Ganio said, because so many companies have OTC brands. For instance, Walgreens, CVS, and Walmart all have lines of OTC cold and flu medicines. “There’s so many labelers […] it’s just too complex to track,” Ganio said.

Navigate the healthcare industry

Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.