Here’s why some countries are experiencing medicine shortages – and what can be done to ensure supply

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Shyam Bishen, Head, Shaping the Future of Health and Healthcare, Member of Executive Committee, World Economic Forum, Antonio Spina, Lead, Health and Healthcare, World Economic Forum

• Common remedies, especially generics including antibiotics, have been running scarce in various regions worldwide – causing concern among patients and consumers, the government and industry.
• A confluence of factors is driving the shortfall, including increased infections, inflation, supply-chain disruptions and regulations.
• While public policy actions may be taken as a result, manufacturers and healthcare leaders can take the lead to ensure sustainable supply and emerging, innovative partnership models could also play a role in establishing resilience.

When seasonal bugs have you running to the clinic or pharmacy for medicines to bring down your temperature or soothe your child’s cough, it can be frightening to hear that they can’t help you because they are out of stock.

Europe, for instance, is experiencing shortages of common medicines. In a survey of medicine shortages carried out between 14 November and 31 December 2022 by the Pharmaceutical Group of the European Union (EU), 100% of the 29 member countries reported experiencing shortages of medicines among community pharmacists and 76% said that shortages were worse than the previous year, 2021. About 79% of respondents reported shortages of anti-infectives for systemic use; while 76% found it difficult to get hold of drugs for respiratory problems; and a range of other conditions, including cardiovascular and gastrointestinal were also highlighted.

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Supply challenges are being faced around the world

But medicine shortages are not unique to the EU region. The UK is experiencing an HRT shortage. US hospitals are reporting supply problems with liquid ibuprofen; while a sudden increase in ADHD diagnoses in the US has led to an unexpected shortage in the drugs used to treat it there. In Mexico, chronic medicine shortages are so dire that many prescriptions couldn’t be fulfilled in 2022, while across Asia, sudden supply drops were linked to disruptions in China and in Australia, the TGA has confirmed various shortages have been seen, and rural areas may be worst affected.

Why are we suddenly seeing such serious medicine shortages?

There are several reasons for the medicine shortages. COVID-19 lockdowns limited the normal circulation of seasonal bugs. This weakened our immune systems and led to higher-than-normal outbreaks of seasonal illnesses, which has increased the annual average demand for medicines that should alleviate them. Pharmaceutical companies could not quickly meet these unexpected demands, as excess capacity is limited to control costs.

Meanwhile, the war in Ukraine continues to impact supply chains and the knock-on effect of high inflation and energy prices have hit generic drug manufacturers, who are sometimes subjected to pricing regulations, particularly hard.

Furthermore, to protect their limited medicine supplies, some countries have temporarily blocked the parallel trade of medicines to other countries. And, once an over-the-counter drug shortage is announced on the news, consumers begin stockpiling.

There is also the problem of over-prescribing. It is estimated, for example, that the UK’s National Health Service loses as much as £300 million a year due to unused or partially used medication that cannot be recycled or re-used.

Manufacturers can innovate to improve supply security

Some medicine shortages are down to misallocation, with some areas of a country being over-supplied with a particular medicine and other areas experiencing shortfalls. The effective use of data and analytics is key to helping to improve access to medicines globally and better-managing supply and demand to pharmacies and individual patients. The National Academies, for example, recently raised the concept of a public database on medical supplies.

As documented in a 2020 USP report, ‘Increasing transparency in the medicines supply chain‘, real-time data from pharmacies and hospital systems would provide a better understanding of the demand for medical products. It states: “These considerations could include strategies for leveraging electronic health records to enable hospital systems or clinics to report information about medical product demand, without disclosing protected patient information.” Improved access to critical data could also unlock opportunities with artificial intelligence (AI) / machine learning (ML) to transform supply chain efficiency.

In production, generics companies can also harness smart technology to cut manufacturing costs by up to 20% while boosting production, states a Bain and Company briefing. “Pharma executives expect smart connected factories to produce total savings of 20% or more, while improving quality and making deliveries more reliable. Specifically, they forecast a 17% reduction of costs related to poor quality, a 15% decline in the cost of converting raw materials into drugs and a 14% increase in delivery reliability.”

There is also scope for generic drug companies to reconfigure strategically, finds the KPMG report Generics 2030: Three strategies to curb the downward spiral. To regain some control over the supply chain, the report suggests generic companies look to mergers and acquisitions to increase scale or to integrate vertically and redesign the supply chain to reduce dependence on distributors and active pharmaceutical ingredient (API) suppliers; and invest in innovation to improve their products.

Shortening supply chains and trying to produce or procure more active ingredients locally, in addition to relying on go-to countries such as India and China, could also strengthen supply and make it easier to increase production in times of additional need. This has the added benefit of reducing pharmaceutical companies’ carbon footprints and limiting their exposure to macroeconomic challenges.

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A prescription for public-private partnerships?

While generics manufacturers and partners can work on any aspects of the above unilaterally, new multi-stakeholder models are increasingly being explored. One example is Civica Rx, a purpose-driven US non-profit drug company founded in 2018 with an explicit objective of preventing drug shortages. Civica has relied on its extensive provider consortium covering 1/3 of US hospital beds, and prolific partnership building with medical suppliers, such as AmerisourceBergen, Sandoz and Hikma, as well as the US Federal Government and state governments.

A concept known as Public Benefit Corporations (PBCs) has also emerged. US-based company Phlow, for example, has partnered with other companies, such as Fresenius Kabi, and the public sector, such as HHS/ASPR/BARDA, to secure the supply of essential medicines. And Mark Cuban’s Cost Plus Drugs has partnered with providers and Pharmacy Benefits Managers (PBMs). Some have theorised that the PBC model could allow pharma to ensure greater access while still meeting business objectives. On the retail and eCommerce side, non-traditional disruptors, such as the recently launched Amazon RxPass and Walmart prescriptions, are also worth keeping an eye on for potential impacts on the ecosystem.

These developments may hint at potentially promising innovative approaches for addressing shortages. Stakeholders across pharma, healthcare providers, governments and others can seek new ways to work together to ensure a more reliable, sustainable medicine supply that ensures resilience and equitable access. These ideas warrant further exploration by leaders across regions.