Drug Shortages Trigger FTC Probe
Summary
The agency is questioning whether hospital purchasing groups and drug distributors have played any role in shortages of chemotherapies and other drugs.
The Federal Trade Commission is launching a probe into recent shortages of chemotherapies and other drugs, examining the role played by companies that help buy and distribute the bulk of medicines sold to U.S. hospitals.
The agency is exploring whether the companies that broker drug purchases for hospitals, along with the middlemen that ship the medicines, have misused their market power to push down prices of generic drugs so much that some manufacturers can’t profit and have stopped production, causing shortages.
The probe is seeking information about a market dominated by a handful of companies. Three groups purchase drugs on behalf of most hospitals in the U.S., while the three leading wholesalers supply about 90% of drugs to hospitals and other buyers across the country.
In a public request for information, the FTC is asking about the drug distributors and hospital purchasing groups and their contracting practices, market concentration and compensation as part of the agency’s examination of drug shortages and their causes, according to a person familiar with the request. The agency is expected to announce the inquiry on Wednesday.
The Healthcare Supply Chain Association, the trade association representing the hospital purchasing groups, has blamed drug shortages on manufacturers’ quality problems and said the groups work with hospitals to manage shortages and increase the number of drug suppliers.
The Healthcare Distribution Alliance, the trade association representing pharmaceutical distributors, has said shortages occur due to many factors, including drugmakers having trouble finding raw materials or sharp spikes in demand. It has said its members work to minimize disruptions.
Insufficient supplies of critical chemotherapies forced doctors to ration supplies last year, and intensified attention on periodic shortages of various generic drugs. Many patients weren’t able to get generic chemotherapy drugs called carboplatin and cisplatin, forcing them to go longer between treatments or turn to second-best alternatives.
The three leading hospital group purchasing organizations, or GPOs, are Vizient, Premier and HealthTrust. AmerisourceBergen, Cardinal Health and McKesson are the big drug wholesalers.
Doctors, patient advocates and generic drugmakers have blamed the group purchasing organizations for shortages, and consumer groups, including Public Citizen and the American Economic Liberties Project, have urged the FTC to look into the role of GPOs.
The leading GPOs represent so many hospitals that they win extremely low prices, the argument goes—so low that some drugmakers cut back production or exit the business altogether. Supplies are then especially vulnerable when a natural disaster hits or a drugmaker must shut down a line or factory due to quality issues, according to the critics.
The inquiry is the latest instance of the FTC’s scrutiny of competition in healthcare.
The agency in September sued one of the country’s biggest anesthesiology providers, challenging a private-equity practice of combining small physicians’ practices into a larger entity. In November, it challenged more than 100 drugmaker patents that it said were improperly listed with the Food and Drug Administration, delaying generics from entering the market.
It is also investigating pharmacy-benefit managers, which negotiate rebates on drugs for health plans or employers.
Write to Liz Essley Whyte at liz.whyte@wsj.com
