Generic Oncology Drug Shortage Means Unintended Healthcare Rationing

In cancer therapy, expensive drugs extend lives, while some cheap drugs save them.

Renowned oncologist and bio-ethicist Ezekiel J. Emanuel, MD, PhD inaugurated a regular New York Times op-ed gig earlier this month with commentary on generic cancer drug shortages.

Taking up a topic that has already been much discussed in both the professional media and the lay press, Emanuel observed that these drug shortages appear “to be the consequence of corporate decisions to cease production, or interruptions in production caused by money or quality problems, which manufacturers do not appear to be in a rush to fix.”

The gravity of this situation is widely acknowledged throughout the medical community. Dr. Hagop Kantarjian of the MD Anderson Cancer Center has gone so far as to observe that, in his opinion, the shortages of cytarabine have “affected life and death situations in the United States.”


It’s not difficult to understand why companies would be demotivated to manufacture generic cancer drugs which, like all generics, deliver low margins. Unfortunately, many of the drugs in short supply – cytarabine, etoposide, and vincristine, among others – happen to deliver cancer cures to children while readily available branded cancer drugs sometimes deliver benefits measured in just months of survival for patients of advanced years, and at costs that can exceed $100,000 per patient. This is, Emanuel noted, a form of de facto rationing that stems from legislated attempts to constrain market forces that might otherwise have worked to make generic drugs more profitable.

The villain of the piece is the Medicare Prescription Drug, Improvement and Modernization Act of 2003, which sets Medicare reimbursement for intravenous medications at six percent above their average selling price. Sales data must be compiled by drug manufacturers and supplied to the government to establish a new average selling price, a process that takes time. As a practical consequence, the legislation restricts drug prices from increasing more than six percent every six months since reimbursement would otherwise lag behind the cost to hospitals and physicians.

Controlling drug prices suppresses supply, resulting in inadvertent rationing

When healthcare costs are rising exponentially, one tool that people are tempted to use is price controls, and Medicare is certainly an instrument of cost containment policy. But you don’t have to be an unrepentant capitalist to observe that price controls are not entirely benign and often have unintended consequences that are difficult to manage. Here, we have just such a case in which market forces – had they been left unfettered – might have allowed for a more rational and humane distribution of healthcare resources.

Emanuel offers two ways in which generic cancer drugs could be more profitable: (1) amending the Medicare Prescription Drug Act so that after several years of availability, reimbursement for generics would rise to an average selling price plus 30 percent or (2) more dramatically removing Medicare from coverage of generic cancer drugs entirely, leaving private pharmacy plans to respond to market forces.

Tackling drug shortages and health rationing head on

While arguing that the market needs to be given more leeway to dictate effective outcomes, Emanuel also took a moment to scold those who have, as he put it, engaged in “scare-mongering about death panels and health care reform.”

The mere mention of healthcare rationing is political suicide. But as this generic drug shortage scenario illustrates, we make decisions all the time as a society that result in healthcare rationing – whether anyone wants to see it, acknowledge it, or call it what it is. We are not facing up to the fact that when we have finite resources, we have no choice but to make difficult trade-offs. And demonizing good-faith efforts to grapple with difficult choices about how to spend limited public healthcare resources sets the process back.

Generic drug shortages are a potent reminder that we are using economic policy to set social policy without tackling the tough issues head on. It would be far better to have an open, explicit debate in which all participate deliberately, than a conspiracy of silence, through which dollars are wasted and lives lost – inadvertently.