Does Tamoxifen scarcity show folly of drug-price regulation?

by Leo Almazora11 Dec 2019

The story behind a widespread shortage of Tamoxifen, a drug that helps prevent breast-cancer from resurfacing after initial treatment, might offer a lesson on the unintended consequences of drug-price regulation.

The supply hiccup affected Carmela Bocale, a retired human-resources professional from Regina, who was recently told by her pharmacist that she could pick up only a fraction of her usual supply because of the shortage.

“I was surprised, because you … always think there’s going to be a supply,” she said in a piece published by the Financial Post.

As reported by the Post, the brand-name version of Tamoxifen was available in 1985 for $2.88 per 10 mg tablet in current dollars, according to a 2018 healthcare policy report published by the CD Howe Institute. But price cuts have allowed patients today to get the drug for 17 cents a pill.

After the patent on the drug lapsed, the number of companies producing it swelled to as many as 11. But because of price reductions, most of those companies have exited the market, leaving only three Canadian suppliers.

Jordan Berman, a spokesman for generic drug company Apotex, said the company recently decided to change its manufacturing and formulation process at an Ontario-based plant. Apotex supplies two thirds of the Tamoxifen market in Canada, so the other two makers, generic-drug manufacturer Teva and brand-name producer Astra Zeneca, could not fill the temporary gap.

While the shortage is already being resolved as Apotex has once again ramped up production, the supply glitch shows how a pricing “race to the bottom” can disincentivize drug manufacturers from staying in certain markets, making it “root cause 1” for drug shortages, as noted in a report by the US Food and Drugs Agency.

When governments and private-sector health organizations drive down the price of generic versions of medications, it can ease the pressure on ballooning health budgets. But at the other end of the seesaw, it can also make profiting or breaking even difficult for firms that supply the drugs. As suppliers drop out and the industry consolidates, markets become more prone to production hiccups experienced by one or more major manufacturers.

“In many cases, there are one or two plants that produce the world supply for a single drug,” said Barry Power of the Canadian Pharmacists Association. “When you only have one or maybe two manufacturing sources, they are much more vulnerable to disruptions.”

The pool of companies that manufacture a given off-patent drug is also shrinking thanks to a growing number of mergers and acquisitions. A 2017 study conducted by Duke University business professors found that activity peaked in 2008 with 800 M&A deals that included 15 megadeals. The fallout, according to a report by the multi-stakeholder steering committee on drug shortages in Canada, has been “fewer options for end customers.”

In Canada, the problem of shortages appears to be more acute for generic companies; the CD Howe report concluded that they are involved in about 70% of such supply problems, with the rest involving the original brand-name manufacturer.

“Expert reports in Canada and the U.S. have recommended that governments and private firms who procure drugs in bulk give credit to a maker’s ability to sustain supply – not just having the lowest price,” the Post report said.