Generic drug shortages are common, may become more common as consolidation occurs among generic drug manufacturers, and carry financial and health consequences. In the case of the shortage of generic selegiline, we found that the shortage occurred in the setting of consolidation of the supply of generic selegiline into one manufacturer (Apotex Inc.), which supplied 83% of the US market. When that manufacturer experienced increased demand,4
a drug shortage resulted that was not completely compensated for by other generic drug manufacturers. Consequently, in this example, a more expensive branded formulation was substituted at a societal cost of at least $75,000 and prescriptions went unfilled at uncertain health consequences.
While many factors influence the occurrence and severity of a drug shortage,9
a likely cause of the generic selegiline shortage was consolidation of generic selegiline supply manufacturing into one principal company. A major factor in this consolidation may have been the decreased production of generic selegiline by another company (Mylan Inc., Canonsburg, PA) starting in mid-2006. The decrease in generic selegiline production by Mylan Inc. may reflect the competing interests and complex relationships between drug manufacturers. For example, Mylan Inc. has financial interests in selegiline in at least 3 different ways: production of generic selegiline tablets, manufacturing and marketing branded capsules (via a 50% ownership of Somerset Pharmaceuticals, Tampa, FL), and production of transdermal selegiline patches (also through partial ownership of Somerset Pharmaceuticals).10
In February 2006, the US Food and Drug Administration approved transdermal selegiline for major depressive disorder,10
and generic selegiline tablet prescriptions filled by Mylan Inc. decreased by 80% over the next year. Therefore, conflicting financial incentives and production constraints affecting Mylan Inc.’s production of generic selegiline may have contributed to the consolidation as Apotex Inc. increased its market share. Previous drug shortages (e.g., naloxone hydrochloride injection and diazepam injection) have also been attributed to market consolidation and subsequent inability of other manufacturers to compensate.11
Generic drug shortages, which are increasing in frequency,9
may become more common given the ongoing consolidation in the generic drug industry. For example, Teva Pharmaceutical Industries Ltd., Petach Tikva, Israel, the largest public company in the generic drug industry, is acquiring Barr Pharmaceuticals in a multibillion dollar buyout.12
Proprietary drug manufacturers are also driving consolidation as they embrace a hybrid model by diversifying their patented drug portfolio with generic drug manufacturing.13
Beginning in 2005 (with Switzerland’s Novartis acquiring Hexal of Germany), 2 such major consolidations have taken place since May 2007: United States’ Mylan Pharmaceuticals acquired Germany’s Merck KGaA generics unit, and Japan’s Daiichi Sankyo Co. bought a majority stake in India’s Ranbaxy Laboratories Ltd.13
These transactions may result in competing financial interests within an organization that could hinder the availability of lower-priced pharmaceutical products.
As this study demonstrates, generic drug shortages carry societal costs. In this case, we quantified the societal cost due to drug substitution of more expensive alternatives to the generic drug. In the selegiline shortage, the principal substitution appeared to be the use of branded capsules, which resulted in an estimated societal cost of $75,000 during the first 4 months of the shortage. While approximately 60% (1,800 prescriptions) of the reduction in generic selegiline prescriptions were substituted for a more expensive alternative, an additional 40% (1,300 prescriptions) went apparently unfilled. These unfilled prescriptions reduced societal expenditures on pharmaceutical costs by an estimated $27,000. While this reduced expenditure may represent a societal “savings,” it would have to be offset by adverse health consequences from cessation of selegiline, which we did not quantify. Worsening of PD symptoms can occur as soon as 1 month after discontinuing selegiline.1
Our estimated economic costs for the selegiline shortage are likely understated for at least 3 reasons. First, costs are only calculated through December 2007, and the shortage did not resolve until August 2008.4
Second, individuals who switched to a more expensive preparation may stay on that drug even after the shortage resolves. Third, patients who did not refill or substitute their prescriptions for generic selegiline during the 4-month time period included in this study may need to substitute with a more expensive preparation in the future. Additional economic costs not quantified include inefficiencies and time costs for patients and health care professionals associated with the shortage (e.g., time spent locating pharmacies with generic selegiline or writing new prescriptions for alternative therapies).
Given the risk of shortages occurring with drugs that may not have ready substitutes or may have greater risks associated with their absence, policy measures and heightened attention are needed to prevent future shortages. Additionally, because anticompetitive behavior between drug manufacturers has been identified in the past14
and because of the increasing consolidation in the generics industry, vigilance by regulators and continued advocacy for patients are needed, particularly as public payers bear an increasing proportion of pharmaceutical costs in the United States. In the future, the Federal Trade Commission, US Department of Justice, US Food and Drug Administration, and their global counterparts will likely need to consider the likelihood and impact of generic drug shortages resulting from consolidation and take proactive steps to minimize their occurrence. For example, generics whose supply is from one dominant producer could be subjected to heightened scrutiny in their manufacturing processes and production levels. Currently, the Food and Drug Administration does not require notification when discontinuing production unless the firm is the sole manufacturer of a life-saving product.15
At a minimum, improved information flow, which surveys indicate is poor,16
will be needed among regulators, manufacturers, wholesalers, pharmacists, and clinicians to prevent shortages and their adverse health and economic consequences for society.