Generic medications shortage

Article published 19 March 2019

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HAVE you been to the chemist lately and been told that your usual generic, cheaper prescriptions are not available and that you will need to shell out for brand prescriptions?

Shortages of medicines can be caused by a number of things.

Two-thirds of shortages result from serious and preventable quality issues. Quality or manufacturing concerns can involve compromised sterility, mould in manufacturing areas or unsterilised containers.

As to the other one-third of shortages, over the past couple of decades, manufacturing of pharmaceuticals for Australian markets has moved overseas, largely to more efficient operations in China and India. This means that Australia has no control over how problems there are solved and how fast.

The increased efficiency of manufacturing has in part been achieved by suppliers of raw materials merging their operations. As a result, pharmaceutical manufacturers are often reliant on a single supplier of raw materials worldwide. If anything goes wrong at the supplier’s end, disruption of production follows and shortages ensue. The types of things that can go wrong are trade disputes, contamination during transport, adverse weather events and other natural disasters.

Additionally, with a global market comes global competition between buyers. And the business reality is that precedence is given to markets with the highest return on investment. As Australia represents only 2 per cent of the global pharmaceutical market, it does not have the purchasing power to secure supply in times of global shortage.

But there are two specific, additional reasons why generic medications can be in short supply. First, buyers have formed group purchasing cartels, which negotiate to drive down the prices of generic drugs with the result that many manufacturers go out of business, leaving one or two for any given drug. This means that any disruption of production leads to a far greater shortage than when manufacturers were plentiful.

Second, the Pharmaceutical Benefit Scheme (PBS) started operating a price disclosure scheme in 2007. Under the policy, drug companies are required to reveal how much they actually charge pharmacies for generic medicines. The PBS then uses this information to reduce the amount it pays to pharmacies for each drug dispensed. The prices of generics were pushed so far down that the PBS had to abandon its scheme for around 60 medicines – including antibiotics and cancer medicines – to ensure the availability of generic drugs.

The Therapeutic Goods Administration maintains a page on its website headed Medicine Shortages Information Initiative, which lists all medicines in shortage in Australia: .

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