High drug prices and drug shortages appear at first to be opposite problems. High prices signal excessive market power; shortages signal insufficient supply or profitability. In the U.S. pharmaceutical market, they are not separate issues. They are produced by the same underlying structure — a tiered system in which lucrative branded and specialty drugs are priced without competitive constraint, while the generic drugs on which most patient care depends are priced through a race-to-the-bottom dynamic that has hollowed out manufacturing resilience.
The Scale of the Problem
The American Society of Health-System Pharmacists (ASHP) maintains the most comprehensive public database of drug shortages in the United States. ASHP’s shortage statistics report that the number of active drug shortages reached an all-time high of 323 in the first quarter of 2024. As of more recent reporting, the active count was 253 — the lowest since early 2022, but still reflecting a supply chain under sustained strain. Three-quarters of all active shortages (75 percent) started in 2022 or later.
ASHP’s 2023 Drug Shortages Survey Report documented that at the end of the second quarter of 2023, there were 309 active, ongoing drug shortages — the highest number in nearly a decade. Over 99 percent of surveyed hospital pharmacists reported experiencing drug shortages. More than half (57 percent) described shortages of antineoplastic (chemotherapy) drugs as critically impactful — meaning treatment had been delayed, rationed, or canceled. The survey also documented that drug shortages add an estimated 5 to 20 percent to hospital drug budgets, with 73 percent of respondents estimating a 6 to 20 percent budget increase.
An ASPE analysis covering the 2018–2023 period found that between those years, 258 unique active ingredients went into national shortage. The total number of ongoing shortage events increased by 11.8 percent from January 2020 to December 2023, with injectable drugs — the most clinically critical form for hospitalized patients — increasing by roughly one-fifth.
Why Shortages Concentrate in Generic Drugs
The drugs most affected by shortages are primarily older, off-patent generics. ASHP’s policy document on drug shortages notes that most shortage-affected medications are low-cost generic drugs, particularly sterile injectable generics used in hospital treatments — chemotherapeutic agents, anesthetics, antibiotics, and electrolytes.
This concentration reflects the economics of generic drug manufacturing. Once patent protection expires and multiple manufacturers enter the market for a drug, price competition is intense. Prices erode quickly and substantially. For many injectable generics — products that require complex manufacturing, stringent sterility controls, and expensive quality assurance — prices can fall to levels that leave manufacturers with extremely thin margins.
When margins are thin, manufacturers have limited capacity to absorb disruptions. A quality failure that requires shutting down a production line, a recall, a regulatory action, or even an unexpected surge in demand can quickly move a drug from adequate supply to shortage. Manufacturers operating at slim margins cannot maintain large buffer stocks — excess inventory represents carrying costs that are not recoverable in a commodity market. The result is a just-in-time supply chain with no resilience margin.
The Group Purchasing Organization System
The role of group purchasing organizations (GPOs) in shaping generic drug markets is central to understanding why the race-to-the-bottom dynamic persists.
GPOs aggregate purchasing volume across hospital members and negotiate prices from manufacturers on their behalf. For generic drugs and hospital supplies, GPO contracting typically takes the form of competitive bidding, with contracts often structured as sole-source or dual-source arrangements — meaning a single manufacturer, or at most two, receives access to the combined purchasing volume of the GPO’s member hospitals.
A Brookings Institution analysis describes the consequence: “Intense price competition and concentrated buyer power in generic markets have created a ‘race to the bottom’ that squeezes out investment” in quality and resilience. GPO sole-source contracting optimizes for the lowest per-unit price while concentrating manufacturing risk in single facilities with no redundant supply buffer. When a sole-source contract manufacturing plant experiences a quality failure, there is no second supplier pre-positioned with inventory and validated manufacturing capacity to fill the gap.
DrugPatentWatch analysis reports that a 2018 analysis found three large buying groups controlled between 72 and 81 percent of all generic drug purchasing. That degree of concentration gives GPOs substantial negotiating leverage — which they use to drive prices lower — but also creates single points of failure. The FTC and HHS issued a formal Request for Information in 2024 specifically investigating whether GPO contracting practices, including sole-source contracting, contribute to drug shortages.
Manufacturing Concentration and Offshore Production
The pressure to lower costs has driven significant concentration in generic drug manufacturing, with a large share of production moving to facilities in India and China. The Brookings analysis found that 61 percent of the finished dosage forms of generic solid oral drugs sold in U.S. pharmacies are primarily made in India. The U.S. accounts for about 22 percent of unit share for generic solid oral dose drugs — largely concentrated in controlled substances due to Drug Enforcement Agency requirements.
Geographic concentration creates supply chain fragility. When a single overseas manufacturing facility accounts for a substantial share of U.S. supply of a critical drug, disruptions at that facility — whether from quality failures, natural disasters, labor issues, or geopolitical events — immediately threaten availability for U.S. patients.
The Brookings analysis identifies manufacturing quality failures as a core driver of shortage risk: “Much of the fragility in the generic drug supply chain is associated with manufacturing quality failures in the production of the finished dosage form.” Quality failures require either remediation — which takes time — or facility shutdown and retooling, during which time that supplier exits the market. When the exiting supplier is the only supplier, or one of two under a GPO contract, the result is a shortage.
The 2022–2023 Chemotherapy Shortage: A Case Study
The shortage of cisplatin and carboplatin — two platinum-based chemotherapy drugs foundational to treating numerous cancers, including ovarian, lung, bladder, and testicular cancer — became the most widely discussed shortage event of the 2022–2023 period.
Cisplatin shortages were first reported to the FDA on February 10, 2023, according to the Society of Gynecologic Oncology. Carboplatin entered shortage in April 2023. The precipitating cause was the shutdown of a major manufacturing facility in India — the Intas Pharmaceuticals plant in Ahmedabad — in late 2022, following FDA inspections that identified significant manufacturing quality violations. As breastcancer.org reported, that facility had been a primary source for both drugs in the U.S. market.
The drugs themselves are inexpensive by drug-market standards — roughly $15 per vial for cisplatin and $35 per vial for carboplatin. But the manufacturing process requires specialized handling and worker safety protections that add to production costs. The profit margin on these drugs is low enough that U.S.-based manufacturers could not quickly scale up production to fill the gap when the Indian facility went offline.
A PMC analysis of oncology drug shortages documents that as of January 2025, a single facility in India produces 24 percent of the U.S. supply of cisplatin, 84 percent of temsirolimus injection, 43 percent of carmustine, and 8 percent of carboplatin. The USP Supply Chain Vulnerability Score for cisplatin has remained elevated since 2023. Cisplatin reappeared on the ASHP shortage list in May 2025.
The clinical impact of the 2022–2023 shortage was real but unevenly distributed. The National Comprehensive Cancer Network (NCCN) conducted surveys of its member cancer centers and found that by September 2023, most centers were able to maintain treatment regimens for patients receiving carboplatin (95 percent) and cisplatin (88 percent) — though for an extended period earlier in the year, some centers had to modify treatment plans and ration available supply.
What the FDA Has and Has Not Been Able to Do
The FDA has statutory authority to require manufacturers to notify it in advance of supply disruptions for drugs deemed medically necessary, and it has the ability to expedite approval of manufacturing supplements and alternative suppliers during shortage events. The agency has also developed a Drug Shortage Task Force and published a framework for shortage mitigation.
What the FDA cannot do under current authority is mandate production levels, require manufacturers to maintain buffer stocks, set prices to make manufacturing more economically attractive, or compel a manufacturer to remain in a market if the economics of production make it unprofitable. The agency can facilitate — through expedited review and regulatory flexibility — but cannot directly mandate the supply decisions that ultimately determine whether a drug is available.
ASHP’s policy recommendations have called for buffer stock requirements, quality metrics tied to contracting, improved FDA monitoring, and structural reforms to GPO contracting practices. The Brookings analysis recommends a Qualified Person (QP) certification model similar to that used in European manufacturing regulation, combined with targeted import testing, to improve detection and deterrence of manufacturing quality failures without destabilizing existing supply chains.
The underlying tension is structural: the same pricing dynamics that have delivered low-cost generics to patients have also stripped out the economic margin needed to maintain manufacturing quality and supply chain resilience. Short of reforming how generic drug markets are organized and priced, the conditions that produce persistent shortages are likely to remain.
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