In a bid to curtail the ongoing problem of drug shortages, the Senate Finance Committee proposed legislation offering incentives to hospitals and other providers to stockpile certain medications.
The bill, which would be known as the Drug Shortage Prevention and Mitigation Act, looks to spur manufacturing of drugs at risk of short supply by inducing providers to sign longer-term purchasing arrangements.
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“It is unacceptable that America is consistently running out of affordable and essential generic medicines,” said Senate Finance Committee Chair Ron Wyden (D-Ore.) in a Friday news release announcing the proposal. "Our bipartisan proposal uses the power of Medicare and Medicaid to ensure the entire American healthcare system has adequate supply for key medicines across the country."
As outlined in the draft legislation, hospitals and other providers would receive quarterly lump-sum Medicare payments for meeting basic and advanced standards, plus additional payments amounting to 5% to 25% of the price of targeted drugs for building up stockpiles. More bonuses are also possible. Providers and manufacturers would agree to stable prices under deals that would last at least three years.
Group purchasing organizations and manufacturers such as the health system-backed Civica Rx would be able to participate. The idea is to provide struggling generic-medicine manufacturers with a more stable market and to somewhat curtail intermediaries' ability to demand prices that are too low to sustain high-quality drug makers, Senate staff said.
The bill would also include exemptions to Medicaid rules requiring drug makers to pay rebates when their prices rise faster than inflation. Generics with just a single maker would still be subjected to rebate rules, but the move would allow manufacturers to generate more income in certain cases.
The Healthcare Supply Chain Association, which represents group purchasing organizations, said in a statement it was evaluating the draft legislation.
"[HSCA] looks forward to continuing to work with bipartisan legislators to mitigate ongoing drug shortages affecting patients and providers across the country," it said.
Other associations representing affected stakeholders, including hospital groups, were not ready to comment on the proposal.
In general, however, drug shortages are a worsening problem that has plagued providers for a long time, said Federation of American Hospitals Executive Vice President of Public Affairs Charlene MacDonald.
"We've been seeing a lot of drugs that are commonly used in hospitals, like saline and certain lower-cost antibiotics that go into shortage basically," MacDonald said. "For hospitals, obviously, that's a big problem in terms of treating patients and just carrying out operations."
According to the American Society of Health-System Pharmacists, more than 300 medicines face shortages.
Exactly how much impact Medicaid and Medicare incentives can have on something as complicated as supply chains is unclear, and the Finance Committee lacks jurisdiction over many of the factors involved.
Because the bill is a draft, Sen. Mike Crapo (R-Idaho), ranking member of the Finance Committee, said in the announcement that the legislation is open to change and input from other senators.
“Prescription drug shortages are fueling high prices and limiting access to life-saving treatments and cures,” said Crapo. “We look forward to working with other members, experts and stakeholders on addressing these life-threatening challenges and promoting consistent, cost-effective health care for Americans nationwide.”
