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National Academies of Sciences, Engineering, and Medicine; Health and Medicine Division; Board on Health Sciences Policy; Committee on Security of America's Medical Product Supply Chain; Shore C, Brown L, Hopp WJ, editors. Building Resilience into the Nation's Medical Product Supply Chains. Washington (DC): National Academies Press (US); 2022 Mar 3.

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Building Resilience into the Nation's Medical Product Supply Chains.

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Appendix BSummary of Recommendations from Contemporary Reports

NATIONAL STRATEGY FOR A RESILIENT PUBLIC HEALTH SUPPLY CHAIN1

Robustness and Industry Sustainment

  • Drive bold investments and incentives for the American industrial base
    • Make significant investments to sustain the U.S. public health industrial base
    • Expand Buy American and Berry Amendment rules to all agencies and grantees
    • Support the use of American-made public health supplies in the U.S. health care sector
    • Use trade tools to counter unfair trade practices and strengthen the public health industrial base needed for national security
    • Sustain a supply chain workforce with the people and skills needed for pandemic preparedness

Agility and Innovation

  • Build a more capable and robust Strategic National Stockpile and expand state, local, tribal, and territorial stockpiling
  • Develop preemptive supply chain demand management capabilities to modulate demand before shortages occur
  • Launch a new public health supplies innovation center and product standardization task force

Visibility and Engagement

  • Maintain end-to-end supply chain visibility through expanded and continuous supply chain surveillance
  • Streamline U.S. government–private sector coordination for sustained public health supply chain private-sector engagement
  • Institute an annual resilience report card

Governance and Management

  • Bolster interagency oversight of the public health supply chain, and sustain a strong U.S. government public health supply chain workforce
  • Revise Executive Order 13603 on National Defense Resources Preparedness
  • Establish a national framework for allocation of constrained resources
  • Revamp global governance of the public health supply chain

BUILDING RESILIENT SUPPLY CHAINS, REVITALIZING AMERICAN MANUFACTURING, AND FOSTERING BROAD-BASED GROWTH2

Boost Local Production and Fostering International Cooperation

  • Investment and Financial Incentives to Boost Production
    • Leverage the DPA and Current Public–Private Partnerships (PPPs) to Establish a Consortium for Advanced Manufacturing and On-shoring of Domestic Essential Medicines Production
    • Near-Term Next Steps:
      ▪

      HHS and the White House will host a high-level summit on drug supply chain resilience to kick off this new initiative.

      ▪

      The administration will assemble a consortium of public health experts (including emergency medicine and critical care) in the government, nonprofit, and private sectors to review the Essential Medicines List and recommend 50–100 drugs that are most critical to have available at all times for U.S. patients because of their clinical need and lack of therapeutic redundancy (Critical Drug List), and determine a potential volume that could be needed, using the surges during COVID-19 pandemic as one metric for that analysis.

      ▪

      HHS will conduct an analysis of the Essential Medicines List that went into shortage in the past year to determine major drivers, including mapping their supply chains to characterize their redundancy, diversity, and manufacturing quality.

      ▪

      HHS will leverage the DPA process to determine the financial incentives needed to on-shore or near-shore the production capacity needed for the global supply chain.

    • Medium-Term Next Steps:
      ▪

      HHS will use the 708 process to assemble a group of pharmaceutical supply chain experts to develop a resilience framework, based on the above analysis, that details the characteristics of a high-quality, diverse, and redundant supply chain for pharmaceutical products.

      ▪

      HHS will map the supply chains for the Critical Drug List to the resilience framework for a robust supply chain and identify those for which on-shoring or near-shoring may be advisable.

      ▪

      HHS will determine if there is a need to increase production or stockpile APIs for the Critical Drug List, and if so, identify the amounts needed in such a stockpile, the benefit and risk of a virtual stockpile, and the ability to use platform technologies to provide surge production in crises.

      ▪

      Additionally, HHS will explore stockpiling strategies to reduce API supply risk, including an analysis of KSMs.

      ▪

      The U.S. government will review reimbursement models for key essential medicines to determine whether changes to reimbursement models could improve the resilience of key essential medicines without unduly affecting U.S. costs.

  • Use Incentives to Create Redundancy for Sterile Injectable Production
    • To increase the resilience of the sterile injectable supply chain, three actions should be pursued to reduce risk:
    • Financial incentives to spur investment:
      ▪

      The United States will continue using the Biomedical Advanced Research and Development Authority and other incentive-based tools to invest in specialized equipment and updates to mature quality manufacturing processes, including advanced manufacturing techniques, for these products. This will help reduce the barrier to entry for new manufacturers or reduce the cost to existing manufacturers looking to upgrade their facilities.

    • Update reimbursement models:
      ▪

      For lower-cost drugs, profit margins from federal payers may play a role in ensuring that sterile injectables are at least at risk of being in short supply. Accordingly, to reduce the likelihood that these products will go into shortage because of low margins, the U.S. government will review reimbursement models to determine updates that may improve supply chain resilience.

    • Procurement guarantees:
      ▪

      While incentives for establishing production and competitive reimbursement models are needed, manufacturers have indicated they also require consistent demand to justify investments for new production. Procurement guarantees, combined with using acquisition flexibilities, can be used to signal commitment to and demand for products from domestic and small firms. These will need to be established in a careful and nuanced manner to ensure that they serve the needs of agencies, including DoD and the Department of Veterans Affairs (VA), and to ensure consistency with U.S. procurement laws and obligations.

    • Near-Term Next Steps:
      ▪

      HHS will convene a working group to analyze how reimbursement policies contribute to the lack of resilience for sterile injectables identified in the previous proposal as well as chemotherapeutics that have been in shortage in the past 5 years.

      ▪

      HHS will evaluate whether certain sterile injectables that are identified as being at significant risk of shortage but are not part of the Critical Drug List medicines identified above, such as sterile pediatric oncology drugs, should also be the subject of improved supply chain resilience work in addition to drugs on the Critical Drug List.

  • Invest in Research and Development
    • Establish Novel Platform Production Technologies as Mainstream
    • Near-Term Next Steps:
      ▪

      Using funding from the American Rescue Plan, in June 2021, the Department of Commerce–sponsored National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL) will launch a whole-of-industry effort to develop fully integrated and smaller footprint platforms that will reduce supply chain demands for raw materials, increase domestic biomanufacturing surge capacity, and more broadly improve technological capabilities that can lead to the biomanufacturing of APIs.

      ▪

      HHS will create an internal task force with experts from FDA and ASPR to increase capacity for supporting development, evaluation, and, if possible, implementation of novel manufacturing technologies and processes. The task force will visit existing facilities and form partnerships with domestic manufacturers or universities to study advanced manufacturing technologies. It will develop a strategy for the secretary on how to facilitate a wider adoption of novel methods for commercial production of pharmaceuticals and biologics.

  • Create Quality Transparency
    • Create a Rating System to Incentivize Drug Manufacturers to Invest in Achieving Quality Management Maturity
    • FDA should lead the development of a framework to measure and provide transparency regarding a facility’s quality management maturity with engagement from industry, academia, and other stakeholders. The development and adoption of this rating would
      ▪

      Communicate the value of quality management maturity so it can be adopted by manufacturers and priced into contracts by purchasers;

      ▪

      Promote the adoption of better tools to measure manufacturing performance to allow earlier detection of potential problems that could lead to shortage; and

      ▪

      Incentivize improvements to manufacturing infrastructure that enhance reliability of manufacturing and thus supply.

    • Next steps:
      ▪

      Establishing a quality rating system for drug and API production is a long-term initiative that will have to be developed in collaboration with business partners and with stakeholders.

      ▪

      As a next step, FDA could begin consultations with stakeholders to develop a framework for rating quality management maturity.

      ▪

      Over time, FDA will consider whether to establish a new PPP with industry to develop and support use of such a rating system. PPPs have proven effective for other federal programs, such as the Pharmacy Quality Alliance, a PPP that develops quality measures for use of pharmaceuticals, some of which have been adopted under Medicare.

  • Improve Information and Data Collection
    • Use Commercial Data to Improve the Resilience of Supply Chains:
      ▪

      Commercial data providers have begun to collect information on the drug and API supply chains. FDA and HHS should encourage stakeholders throughout supply chains to increase their use of commercial data to identify and mitigate supply chain risks while the U.S. government stands up a more comprehensive initiative to collect data and to improve surveillance and oversight of drug and API supply chains.

    • Seek Additional Authority Through Which FDA Can Collect Additional Data and Take Action to Improve Surveillance, Oversight, and Resilience of Supply Chains:
      ▪

      Over the longer term, the U.S. government should establish a new initiative to collect additional supply chain data to improve surveillance, oversight, and supply chain resilience.

      ▪

      The following are several critical sources of new data necessary to support such surveillance work:

      □

      Drug manufacturing volume information and reporting;

      □

      Complete registration and listing requirements;

      □

      Distribution data on prescription drugs and certain biological products;

      □

      Requiring manufacturers to notify FDA of an increase in demand; and

      □

      Requiring that the labeling of API and finished product labeling include original manufacturers.

    • Next Steps:
      ▪

      HHS will convene industry and other nongovernmental stakeholders to share insight on commercial data sources and to encourage stakeholders across the supply chains to increase their use of commercial data to improve supply chain resilience.

      ▪

      HHS will develop and make recommendations to Congress seeking statutory authorization to increase FDA and HHS ability to collect information and to require that API and finish drug labels identify original manufacturers.

Build Emergency Capacity

  • Explore the Creation/Expansion of a Virtual Strategic Stockpile of API Reserve and Other Critical Materials Managed by the Strategic National Stockpile, Including Finished Doses
    • The United States should create a virtual stockpile of APIs and other critical materials necessary to produce the identified Essential Medicines, with prioritization of the Critical Drug List and reliance to the extent possible on domestic suppliers, especially small and small disadvantaged businesses.
    • Next Steps:
      ▪

      HHS will determine specific API and finished drugs that need to be stockpiled, and identify the amounts needed in such a stockpile, the benefit and risk of a virtual stockpile, and the ability to use on-demand manufacturing to provide surge production in crises.

      ▪

      As part of this analysis, HHS will explore stockpiling strategies to reduce API supply risk, including an analysis of KSMs.

Promote International Cooperation and Partner with Allies

  • Ensure International Harmonization for Reviewing and Responding to Supply Chain Risk with Partnering Nations
    • The U.S. government should work through already established international regulatory collaboration and harmonization organizations, including but not limited to the International Coalition of Medicines Regulatory Authorities, the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use, and the Pharmaceutical Inspection Cooperation Scheme to strengthen cooperation with allies and partners. The U.S. government should also use other bilateral and multilateral fora and engagements to strengthen drug and API supply chain cooperation.
    • Specifically, the U.S. government should use the criteria established in the first recommendation regarding the optimum geographic diversity and redundancy in a supply chain in collaborations with our major regulatory partners, who are already aligned on the need for more robust and stable supply chains and are beginning their own evaluations regarding the need for domestic manufacturing together with supply chains that are integrated with allies.
    • Next Steps:
      ▪

      For the Critical Drug List identified in the first recommendation, engage with international partners to map a global supply chain where redundancy and diversity includes sufficient on-shoring, production in geographically accessible locations, and production by allies.

DRUG SHORTAGES: ROOT CAUSES AND POTENTIAL SOLUTIONS3

Recommendation 1: Create a Shared Understanding of the Impact of Drug Shortages and the Contracting Practices That May Contribute to Them

  • Among the areas most needing attention are
    • Quantification of the harms of drug shortages, particularly those that lead to worsened health outcomes for patients:
      ▪

      Previous efforts to assess the costs of drug shortages have generally been limited in scope and depth, but nevertheless suggest that the total national effect of shortages may be very large. Given that FDA has recognized and posted on its website more than 100 shortages at a single point in time, it is especially important to have additional research to assess the full effect of shortages on patient outcomes and, more generally, on health care delivery and health care system costs. Previous estimates, at hundreds of millions of dollars annually, may have drastically underestimated the harms of drug shortages.

    • Better characterization of shortages:
      ▪

      Currently, public- and private-sector stakeholders have limited information to quantitatively characterize shortages in terms of their frequency, persistence, intensity, and effect on available treatments in specific therapeutic categories. Having this information would help improve stakeholders’ understanding of the effect shortages have on the nation’s health care.

      □

      Several stakeholders maintain information sources that, if combined, could shed more light on the extent of drug shortages and their potential effects on the health system. For example, wholesalers track order fill rates and inventory changes, and manufacturers oversee proprietary data on production capacity and production volume by facility. Combining these data could enable better measurement of the frequency, persistence, and intensity of shortages and of their effects.

    • Greater transparency in private-sector contracting practices: °
      ▪

      Generic drug manufacturers have cited contracting practices as a source of business uncertainty and “race to the bottom” pricing dynamics. FDA heard from stakeholders that some contracts currently include “low-price clauses” that allow GPOs to unilaterally walk away from a contract if a competing manufacturer is willing to supply the same product or bundle of products for a lower price. FDA also reviewed evidence that “failure-to-supply clauses” in contracts are sometimes relatively weak, requiring that an alternative source of the drug is available and typically recovering just 10 percent of the lost value. More systematic study of current contracting practices is needed and could support development of a model contract designed to promote reliable access to safe and effective drugs.

Recommendation 2: Create a Rating System to Incentivize Drug Manufacturers to Invest in Achieving Quality Management System Maturity

  • This proposal aims to rectify this failure by suggesting the development of a system to measure and rate the quality management maturity of individual manufacturing facilities based on specific objective indicators. A rating would evaluate the robustness of a manufacturing facility’s quality system and could be used to inform purchasers and GPOs about the state of, and commitment to, the quality management of the facility making the drugs they are buying. Pharmaceutical companies could, at their discretion, disclose the rating of the facilities where their drugs are manufactured. GPOs and purchasers could require disclosure of the rating in their contracts with manufacturers. This effort would introduce transparency into the market, and provide top-rated producers with a competitive advantage, potentially enabling them to obtain sustainable prices as well as grow market share.

Recommendation 3: Promote Sustainable Private-Sector Contracts

  • FDA believes that the private sector should establish contracts that address the first and second root causes of shortages by
    • Providing Financial Incentives:
      ▪

      Contracts should ensure that manufacturers earn sustainable risk-adjusted returns on their investment in launching or continuing to market prescription drugs, especially older generic drugs that remain important elements of the medical armamentarium.

    • Rewarding Manufacturers for Mature Quality Management:
      ▪

      Similarly, contracts should recognize and reward manufacturing quality maturity. This could be done through a number of different mechanisms, such as paying higher prices for drugs manufactured at top-rated facilities, requiring a certain quality maturity rating as a condition of contracting, or guaranteeing purchase of a set volume of products from sites achieving a certain maturity rating. By offering escalating premiums for drugs from more highly rated facilities, where the rating system recognizes different levels of achievement, purchasers could provide the incentives and means for manufacturers to move up the quality management maturity spectrum.

DRUG SHORTAGES: A REPORT FROM THE PEW CHARITABLE TRUSTS AND THE INTERNATIONAL SOCIETY FOR PHARMACEUTICAL ENGINEERING4

  • The report recommends that the pharmaceutical industry should
    • Develop systems to proactively identify and resolve quality issues:
      ▪

      It was apparent from the interviews as well as a review of the 29 product examples that quality remains a primary driver behind shortages—one that the industry must address.

      ▪

      Improvement opportunities should focus on strengthening quality and also development and implementation of systems that proactively identify, measure, and monitor risks across the manufacturer’s overall supply chain. This includes CGMP compliance risks as well as issues that may develop when there are less than robust development and/or manufacturing processes in place. Manufacturers should be diligent in selecting suppliers and, when necessary, partner with them to help improve their quality systems.

  • Understand the risks across the supply chain:
    ▪

    Despite uncertain market demands, companies should have (1) systematic approaches in place for evaluating the risks across their supply chains and (2) the ability to predict the amount of product needed. That would help them understand and apply the right mitigations across their portfolios by product type. These risk evaluations should look beyond a mere understanding of the compliance and specific individual product risks and instead be broadened to include a review across multiple dimensions. For example, ISPE’s Drug Shortages Prevention Plan identified the following dimensions that should be reviewed to understand the risk of a potential shortage: corporate culture, quality systems, metrics, business continuity planning, communication with authorities, and building capabilities.

  • Improve market forecasts:
    ▪

    Industry, regulators, and purchasers must begin working together to improve the accuracy of the information related to the risk of a shortage that they collect and communicate. Without these market insights, companies are not making the investments necessary to expand facilities or upgrade equipment to create the additional manufacturing capacity that would protect against future shortages. The ability to predict a drug’s expected demand is especially important since having multiple replacements for a product does not protect it from experiencing a shortage. Although companies will not share specific market strategy information with their competitors, purchasers, or even regulators, they need a system to improve the accuracy of volume predictions for annual manufacturing, especially when it comes to low-volume drugs that have multiple replacements and variable annual demand cycles. Companies would be more likely to build the mitigations they need to reduce the risk of shortages if levels of confidence in the information provided were to increase.

  • Improve overall incentives between purchasers and manufacturers:
    ▪

    Purchasing groups should offer incentives such as long-term, exclusive contracts or guaranteed orders to motivate companies to invest in backup manufacturing facilities. The

    ▪

    investments needed to build such facilities or develop dual sources can be significant, and incentives would help companies reduce the risk of building capacity they would not use.

  • Improve collaboration with regulators:
    ▪

    While the companies said that relationships with regulators had improved, they also cited the need to continue identifying ways of addressing disconnections that limit the ability of the manufacturer—because of the time needed to obtain approval and implement changes—to expand capacity or invest in new equipment. In addition, a solution that enables a more effective way to update market authorizations for legacy products is needed. Putting such a solution in place would make it easier for manufacturers of these products to update their market authorizations and create the capacity needed to protect against shortages.

DRUG SHORTAGES AS A MATTER OF NATIONAL SECURITY: IMPROVING THE RESILIENCE OF THE NATION’S HEALTH CARE CRITICAL INFRASTRUCTURE SUMMIT5,6

Regulatory

  • Develop a list of critical drugs. Use the WHO Model Lists of Essential Medicines and other existing resources as a starting point to define what a shortage is and develop a list of critical drugs needed for (1) emergency response and (2) saving and preserving life. Using historical data and manufacturing input, address why these drugs have been on the shortage list. The critical list can be used to
    • Stabilize the availability of critical drugs by working with manufacturers and the Food and Drug Administration (FDA) to create redundant product in multiple locations in anticipation of natural disasters and other supply chain threats.
    • Assess the quality of pharmaceutical manufacturers measured against the importance of drugs on the critical list.
    • Work with the private sector for greater transparency surrounding the source of raw materials and manufacturing locations so providers can more easily assess pharmaceutical product quality. FDA has proposed a star rating system for pharmaceutical manufacturers, which could increase transparency.
  • Create a multistakeholder advisory panel with FDA to address key issues, such as the possibility of creating a stockpile of critical drugs, the logistics of warehousing such excess pharmaceutical inventory, and where the excess inventory should be stored.
  • Improve communication with the entire drug supply chain, including health care providers during, or in advance of, a public health emergency or other event that may create a drug shortage. FDA should provide the health care community with information simultaneously on the type of products that may be affected and the expected duration of the effect. To prevent hoarding of inventory that could result from such communication, manufacturers could put product on allocation to ensure that remaining supply is distributed equitably.
  • Streamline regulations to incentivize increased manufacturing production.
    • Compounding regulations: 503(b) outsourcers need incentives to make drugs in short supply; it is costly to ramp up for only a short duration.
    • Global regulatory environment: there are multiple agencies internationally, all with competing requirements for manufacturers.
    • Align with FDA’s initiative to harmonize international technical standards for approval of generic drugs.
  • Engage CMS to discuss the practice of citing hospitals that use medications after the guaranteed stability period in product labeling. This may, for example, address a powder after it is solubilized, which can contribute to unnecessary medical waste.
    • There are situations where evidence exists in the literature that stability goes well beyond the period of time listed in product labeling. However, CMS/TJC will cite a hospital even though the organization has evaluated this evidence and revised the date based on that. This warrants further discussion with CMS to see what might be needed to avoid or address drug shortage situations.
  • Encourage FDA to consider how reducing the number of unapproved (pre-1938 FD&C) drugs on the market might affect shortages.
    • FDA has been assisting companies with finding opportunities to legally market older “grandfathered” products that are currently marketed without the required FDA approval. While the FDA approval process ensures that marketed drugs meet current FDA standards for safety, efficacy, quality, and labeling—there have been concerns that these efforts to bring widely used but unapproved drugs into compliance with current FDA requirements have resulted in drug shortages.

Legislative

  • Enact legislation that requires a notification requirement for medical product devices and equipment needed to administer medications, similar to the legislation enacted in 2012 that requires drug manufacturers to notify the Food and Drug Administration “of any changes in production that is reasonably likely to lead to reduction in supply” of a covered drug in the United States.
    • For example, fluid containers to dilute medications for infusion.
  • Enact legislation requiring a risk assessment of foreign source active pharmaceutical ingredients (APIs).
    • Relying predominantly on other countries for the necessary ingredients to manufacture crucial drugs puts the United States at risk.
  • Require federal government authorities with jurisdiction over national security to conduct an analysis of domestic drug and medical device manufacturing capability and capacity for critical products to assess whether a threat to national security exists.
  • Require a GAO study to examine all aspects of the drug supply chain to see if there are any new issues exacerbating drug shortages.

Legislative and Regulatory

  • Develop incentives for drug manufacturers to have contingency or redundant production plans for their pharmaceutical products on the critical drug list. The backup plan should include prioritizing the most medically necessary products, qualifying third-party suppliers across their network, and increasing production and inventory for API and finished goods.
  • Investigate developing a system of paying suppliers to hold inventory, perhaps similar to the system employed by the DoD/Defense Logistics Agency. Consider partnering with the DoD to create contractual leverage with drug manufacturers for civilian hospitals.
  • Incentivize manufacturers and work with the FDA to repackage pharmaceuticals according to the amount of medication commonly used to reduce waste (e.g., only a 30 mL vial of a drug is available when most common volume needed is 5 mL).
  • Create an Office of Clinical Affairs within the Drug Enforcement Agency (DEA), so DEA personnel will be available to address the clinical side of medication shortages of controlled substances, rather than just the diversion enforcement aspect.

Market/Nonlegislative or Regulatory

  • Standardize medical concentration, containers, and sizes to stabilize pharmaceutical supply and reduce the probability of patient harm caused by constantly needing to change concentrations and associated technology. Standardizing products reduces the risk of adverse drug events when shortage products are substituted. Standardizing the concentration of compounded products within organizations also helps provide a critical mass for industry to consider making previously unavailable products available.
  • Identify tools that address supply access, such as Pfizer’s web access tool, which provides information about happenings at Pfizer’s facilities, latest product updates, and a Q&A forum.
  • Ensure hospital staff, health care providers, and pharmacies have capacity to manage drug shortages.
    • Ensure early notification of predictable medication shortages and medication substitutes so staff can build necessary information into communication efforts.
    • Work with medical and specialty organizations to ensure necessary information is built into educational efforts, such as national guidelines and continuing education.
  • Examine how changes in United States Pharmacopeia (USP) standards for drugs with a solid historical safety record can affect supply, and whether these changes are necessary.
    • Consult with USP representatives about pharmaceutical regulations that may lack an evidence base.
  • Request that electronic health record (EHR) vendors make changes to their systems to ease the burden of making drug product changes when a shortage occurs. An example would be some sort of tool that makes changes to various integrated technology databases at the same time (like EHR and smart pump drug libraries, or automated dispensing cabinets and pharmacy inventory systems).

Footnotes

1

For more information on these recommendations and to read the full report, see https://www​.phe.gov/Preparedness​/legal/Documents​/National-Strategy-for-Resilient-Public-HealthSupply-Chain.pdf (accessed October 7, 2021).

2

For more information on these recommendations and to read the full report, see https://www​.whitehouse​.gov/wp-content/uploads​/2021/06/100-day-supply-chain-review-report.pdf (accessed October 7, 2021).

3

For more information on these recommendations and to read the full report, see https://www​.fda.gov/media​/131130/download (accessed October 7, 2021).

4

For more information on these recommendations and to read the full report, see https://www​.pewtrusts​.org/-/media/assets​/2017/01/drug_shortages.pdf (accessed October 7, 2021).

5

These recommendations represent the thoughts of individual attendees of the summit and are not consensus recommendations.

6

For more information on these recommendations and to read the full report, see https://www​.ashp.org​/-/media/assets/advocacy-issues​/docs/Recommendations-Drug-Shortages-asMatter-of-Natl-security.ashx (accessed October 7, 2021).

Copyright 2022 by the National Academy of Sciences. All rights reserved.
Bookshelf ID: NBK583736
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