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Why do hospitals keep running out of generic drugs?

AILSA CHANG, HOST:

Right now, IV fluids are in short supply after Hurricane Helene hit a key factory, but drug shortages have been a problem for years. Hurricane or no hurricane, common cheap drugs that hospitals rely on are just sometimes unavailable. Sally Helm from NPR's Planet Money podcast explains the economics behind these shortages.

SALLY HELM, BYLINE: Jared Sibett (ph) is a flight nurse in the Mountain West. He transports patients via helicopter or airplane.

JARED SIBETT: Well, it's unpredictable, I guess. You could get somebody who fell off a cliff and broke their leg. You could get a bear mauling. So it keeps me on my toes.

HELM: Jared spoke to us without clearance from his higher-ups, so we're leaving the name of his hospital out. And he's noticed this problem - drug shortages. Common generic drugs that he uses every day sometimes run out. This is a problem at hospitals all over the country, even for basic things like dextrose and saline - basically saltwater and sugar water. These shortages are bad for patients.

SIBETT: The simpler the drug is, the more upsetting the feeling is. This problem is a solvable problem in a free market, so could we please just fix that already?

HELM: I set out to understand these shortages, and early on, I found a helpful guide.

MARTA WOSINSKA: I have been looking at these issues since 2011.

HELM: That's Marta Wosinska. She's a health care economist and a senior fellow at the Brookings Institution. She says most drugs that get hit by shortages are in a particular category. They're injectable drugs mostly administered in hospitals. And often, the immediate cause of a shortage is a manufacturing problem. These injectable drugs have to be sterile. We don't want to inject unsafe things like bacteria straight into our veins.

WOSINSKA: It could also be metal shavings or glass particles. You do not want to have these contaminants in these products, right?

HELM: Marta says if something does go wrong at a factory, it might have to shut down for a bit and, boom, shortage. Many of these drugs have few manufacturers. They're generics, not under patent. Anyone can make them. And for drugmakers, they're not all that profitable. They sell for a pretty low price.

WOSINSKA: There is this tremendous price pressure. And some of those life-saving drugs are costing us less than a cup of coffee.

HELM: And now we're at the heart of the economic mystery. Because if prices are too low, so low that we're getting shortages, why don't manufacturers just raise the price more? One possible reason? A lot of hospitals have pooled their buying power, negotiating as a group. That can drive prices down. There are also some rules that make it hard for manufacturers to raise prices too much. They're meant to keep health care costs down for patients and hospitals.

What are the good reasons to set things up to bring costs down?

WOSINSKA: What are the good reasons? You know, we spend a lot of money on health care. And I don't even know how sort of - to talk about this (laughter).

HELM: But Marta says the system we have now is missing something - a greater focus on supply chain resilience. Shortages would happen less often if manufacturers had a spare factory or a backup supplier. But to get that to happen, hospitals may need to pay more for these drugs.

WOSINSKA: We need to incentivize hospitals to pay attention to which manufacturers are reliable and put much more weight on that rather than just price.

HELM: Marta imagines a way to reward hospitals for taking proactive steps to prevent shortages, like by working with a higher-quality manufacturer. Then that manufacturer could charge a higher price. It's a solution geared towards that supply chain resilience, which has value, especially to patients. But it's been hard to get anyone in this system to pay for it.

Sally Helm, NPR News.

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Sally Helm