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A tale of 2 industries: FDA’s Robert Califf weighs in on ‘fundamental problem’ causing so many shortages

Robert Califf, M.D., is “fired up” about the spate of U.S. drug shortages that now constitutes a “national security threat,” the FDA commissioner said Tuesday.

“I did not come back to FDA to spend all my time on supply chain, but that’s what’s happened,” Califf said in response to a question about shortages during a recent presentation of the Alliance for a Stronger FDA. “And I feel like I know a lot about it, and I’m pretty fired up to do something about it.”

Countless therapeutics, from ADHD meds and weight loss drugs like Novo Nordisk’s Wegovy to critical chemotherapies for cancer patients, have run short in recent months and years. This has vexed patients, doctors and the FDA alike.

“I don’t think that’s good for society,” Califf said, describing the barrage of shortages as a “national security risk.”

The “fundamental problem,” to hear Califf tell it, is that “we essentially have two drug industries in the U.S.”

There’s the “innovator industry,” where Califf said he thinks “the prices are too high,” and then there’s the generics industry, where “a lot of the prices are too low.” 

“What I mean by that is that the price has been driven down below the cost of manufacturing and distributing the drug,” he said. “And we have an industry which is continuing to leave the U.S. because it’s not viable to run the business.”

Califf blamed that pricing squeeze on the success of generic drug laws, which have enabled wider access over the last several decades and have “worked in over 90% of prescriptions,” the commissioner said. But Califf said it’s time for changes “so the industry can be sustained.”

On innovator prices, the commissioner couched his statement by acknowledging it’s “not the FDA’s lane” but that he was just voicing his opinion “as a human being.”

Meanwhile, despite countless surveys showing that Americans are upset about high drug prices, executives in the generic industry have long flagged concerns about pricing pressures in that specific sector. As the FDA sought to increase its number of generic approvals over the years, that raised the level of competition in the copycat industry, which already had a lower barrier to entry than the branded biopharma segment.

Prices tumbled, forcing some players such as Novartis’ Sandoz to deemphasize their growth plans in the generics field. Sandoz is now largely relying on biosimilars and other complex copycats for growth going forward. Recently, though, the generics biz has showed some signs of recovery.

Califf, for his part, is a cardiologist who previously served as FDA commissioner under Barack Obama from 2016 through 2017. He came back under the Biden administration and was confirmed again for the top FDA spot in February 2022.

It’s not all on manufacturers to fix the shortage crisis, the commissioner said. During his talk, Califf placed some blame on consolidation among hospital pharmacies, or group purchasing organizations, and distributors. 

To help right the ship, Califf said the FDA needs more information to map out the entire pharma supply chain to identify weaknesses.

“I think, like the banking industry, ultimately, over time, we’re going to need to have a way for a government agency to delve in and do stress testing and, when there’s an impending shortage, intervene,” Califf said.

The FDA is also moving toward greater transparency in two related areas, Califf pointed out.

First, plant inspections will be “more available on the internet” and “easier to find,” the commissioner said. The agency will also work to illuminate its “quality management framework” for those inspections.

That framework will look at issues such whether manufacturers have a quality system, diversification and redundancy in their supply chains and more.

Meanwhile, lawmakers are well aware of supply chain problems. In one recent bid to improve the situationSen. Gary Peters, D-Michigan, proposed a bipartisan bill to create a federal database to map supply chain vulnerabilities.

The proposed legislation would require the Department of Health and Human Services to track the origin of each drug, quantities available and the location of the facilities used to manufacture them. The law would also map out inspections, recalls and import alerts.