There are signs that the supply chain issues we’ve all witnessed over the past several years have started to subside, offering relief to many. That said, the pharmaceutical industry isn’t entirely out of the woods just yet. Supply chain setbacks have led to a number of ongoing drug shortages — from Adderall to amoxicillin to albuturol — and increasing costs for select medications, insulin in particular. While insulin costs have been slowly increasing over the last 20 years, they’ve jumped from less than $100 dollars to nearly $800 per month in some cases over the past decade. The skyrocketing cost of this life-saving medication has put many families in difficult positions as they have no choice to pay the price.
Regulatory action
The nation’s drug shortages have not gone unnoticed. U.S. Congress took action by passing legislation in the form of the Inflation Reduction Act which made lowering the cost of medications a priority. While the rule was initially meant to apply to everyone, the bill failed by three votes. The bill was revised and individuals must be eligible for Medicare to qualify.
Some pharmaceutical companies are taking notice and making reductions on their own. In March 2023, Eli Lilly announced they would only charge patients with commercial insurance $35 for insulin, matching the cost of those eligible for Medicare. If providers haven’t prescribed the cost-effective version of a medication, consulting with a pharmacist on an alternative option may help keep the costs down while maintaining proper treatment.
Continued drug shortages can negatively affect claims by delaying or disrupting an employee’s treatment plan. These concerns could prevent them from returning to work quickly, resulting in increased costs. If the medication is considered a first-line agent like albuterol or amoxicillin, finding an alternative option could increase costs. Cases where the worker requires hospitalization could also result in significantly higher costs.
Responsibility
Supply chain issues are indeed one reason behind the industry’s shortages and increased costs, but there are other variables to consider. The pandemic made telehealth a simpler and contactless way to get in touch with a provider. In response, the Drug Enforcement Administration (DEA) allowed controlled substances to be prescribed without an in-person evaluation. From 2020 to 2021, the demand for Adderall increased by 20%, although the DEA has stringent rules on maximum production to avoid patient abuse and prevent excess from getting into the wrong hands. Despite the increased demand, the DEA did not increase the quota that could be manufactured until this year. And even so, the quota to be manufactured was only increased by about 10% with a certain allotment. It remains to be seen whether this increase will solve the shortage concerns.
Several drug shortages materialized due to the lack of demand during the pandemic. With the majority of Americans staying at home and wearing masks when out in public, the spread of bacteria went down. Manufacturers slowed their production to meet the moment, but when the demand picked back up, it was difficult to keep up. This environment, coupled with the lack of raw materials and capacity constraints, added fuel to the (shortage) fire.
A look back
A history of drug shortages shows a trend toward low-profit generic medications like amoxicillin and albuterol. Albuterol is a critical medication for millions of Americans suffering from asthma and COPD; today, though, many manufacturers are less focused on these medications because of their lower profit margins. Akorn Pharmaceuticals, historically a large producer of albuterol, has halted its production, leaving Nephron Pharmaceuticals as the only domestic supplier. Currently the shortage is only affecting the liquid used in nebulizing machines, not the production of handheld inhalers.
A look ahead
Drug shortages can have a significant impact of workers’ compensation claims and it is important to work with healthcare providers to ensure workers receive proper and timely treatment. With manufacturers and government agencies working together, production is increasing to relieve the current shortages, and penalties are in place should drug costs rise faster than the inflation rates. These are the industry’s response efforts to ensure supply chain and costs stay stable — we’ll continue to monitor and report on the trends.
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