NPR: Many generic drugs are in short supply (because they’re cheap)

[tshile]

This came up on my drive out of town last Friday. Essentially the driving down of generic prescriptions had made them not profitable, which means companies stop producing them, which leads to shortages. 
 

Which is one of those things certain people warn about when it comes to tackling expensive aspects of healthcare, but are generally laughed at and dismissed. But, it’s clearly happening 

 

just one excerpt from it, it’s a 5 minute listen. 

 

Quote

As a country, you know, we depend on generics for, like, 90% of our prescriptions - 90%. So those are very valuable to us from a health perspective, but they're treated as having almost no value in the marketplace. You know, basically, the wholesale system is set up to push prices lower and lower. And that might sound good, but it isn't if prices are too low. And, you know, fewer profits mean fewer investments in factories, and fewer factories make us more vulnerable to shortage

more here:

https://www.npr.org/2023/11/11/1212465756/many-generic-drugs-are-in-short-supply

[PleaseBlitz]

15 minutes ago, tshile said:

Essentially the driving down of generic prescriptions had made them not profitable, which means companies stop producing them, which leads to shortages. 

 

I'm sure the market is distorted because of industry efforts to fix prices, but from a pure economics perspective, it should work like:

 

1.  the driving down of generic prescriptions had made them not profitable;

2.  which means companies stop producing them;

3.  which leads to shortages;

4.  which makes the demand for drugs outstrip the supply;

5.  which causes the prices to go back up;

6.  which makes them profitable;

7.  which leads to more companies producing them;

8.  which eliminates the shortages. 

[tshile]

5 minutes ago, PleaseBlitz said:

1.  the driving down of generic prescriptions had made them not profitable;

2.  which means companies stop producing them;

3.  which leads to shortages;

4.  which makes the demand for drugs outstrip the supply;

5.  which causes the prices to go back up;

6.  which makes them profitable;

7.  which leads to more companies producing them;

8.  which eliminates the shortages. 

Right, but if you listen to it or read the transcript, you won’t find the healthcare experts or economists they brought in to explain it saying any of that. 
 

you will find them pointing to the EU method of setting a price floor to prevent exactly this, as one example of how someone else solved the problem. 

Edited November 14, 2023 by tshile

[PleaseBlitz]

15 minutes ago, tshile said:

Right, but if you listen to it or read the transcript, you won’t find the healthcare experts or economists they brought in to explain it saying any of that. 
 

you will find them pointing to the EU method of setting a price floor to prevent exactly this, as one example of how someone else solved the problem. 

 

I read the transcript and you are right, they stop were the problem pops up and talk about the devasting effect it has on the most vulnerable people imaginable (kids with cancer).  They don't get to the next steps, other than at the very end:

 

Quote

Raising prices sometimes happens - for instance, when all but one manufacturer is left standing, and we usually hear about it when that company gets greedy and raises the price from a couple hundred bucks to tens of thousands of dollars. 

 

The expert goes to the most extreme example (i.e., Martin Skreli), but the "regular" example is the market finding the happy medium of supply (people making the drug) and demand (people buying the drug).  Again, that assumes an ideal marketplace, which the US does not have for healthcare.