Drug Shortages and Alternative Sourcing Opportunities
All stakeholders across the drug supply chain must work together to develop and support proactive strategies, creating resilience across the health care ecosystem to avoid and mitigate shortages.
Drug shortages in health care have been a persistent issue over the past decade, yet, the industry is continuously innovating and finding ways to overcome these challenges. As of December 2024, the number of active drug shortages is down 271 from an all-time high of 323 in early 2024.1 Recent disruptions in the supply of oncology products and other critical areas—such as central nervous system drugs, antimicrobials, hormone agents, and cardiology therapies—have highlighted the need for a unified approach across all industry stakeholders to maintain drug availability.
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The US pharmaceutical supply chain, while globally interconnected and complex, continues to present opportunities for innovation and increased resilience. The significance of drug shortages is understood by health care providers, health systems, and, most importantly, patients. By focusing on collaboration across the health care supply chain, we can continue to strengthen our systems and mitigate drug shortages.
Creating a Resilient Pharmaceutical Supply Chain
As a leading wholesale distributor of medicines in the US for nearly 2 centuries, McKesson has long recognized the importance of creating resiliency across the supply chain. By dedicating resources to creating effective strategies for sourcing and managing inventory to rapidly adjust to changes in supply, we are improving our ability to anticipate and proactively mitigate potential drug shortages. Through proactive practices, including continuous process improvement, developing and applying alternate supplier strategies, leveraging artificial intelligence (AI) and machine learning (ML), and contingency planning, we aim to facilitate equitable product distribution to the patients who need them.
Developing a Reliable Sourcing Strategy
A key indicator of a potential drug shortage is the availability of active pharmaceutical ingredients (API). API availability can be impacted by multiple factors, including geographic concentration of API manufacturing, changes in testing requirements, and a limited or disrupted supply of key starting materials. With our sourcing partners, we are working to evaluate potential risks to ingredient availability utilizing a sourcing model that creates a broad view of the supply chain. We believe that sourcing strategically, including multiple formularies in a portfolio with diversified geographical sources, can help to optimize inventory levels and secure backup products.
Maximizing Intelligence With Advanced Technology
Creating new models and ways of working is essential in enabling us to monitor, communicate, and respond accordingly to supply chain trends and address drug shortages as they begin to occur. Potential challenges in supply can be identified by AI and ML. By analyzing extensive datasets, including publicly available historical sales information, market trends, and external factors, we are developing AI algorithms to help identify potential shortages and enable well-informed decisions regarding inventory management.
Assessing Supply Chain Resilience
When developing sourcing strategies and alternative sourcing options, various factors should be considered that may impact how to partner across the supply chain. For instance, the cost analysis of a molecule’s ingredients is critical—about 56% of molecules in shortage are priced at $1.00 per unit or less, and about 75% are below $5.00 per unit.2 It’s important to determine whether the cost creates financial stress for the ingredient or the source in a way that may require risk mitigation.
Transportation logistics, as well as political and economic stability, are also key factors to examine. Understand where the product is moving across the globe and what could impact its movement, such as a labor union strike, political strife, or a weather event.
Taking Proactive Steps for Health Systems to Mitigate Shortages
While drug shortages are a broad issue impacting stakeholders across the continuum of care, they present unique challenges for health systems and hospitals. Managing a drug shortage is a labor-intensive process for health systems, which already face a multitude of challenges in bolstering operational performance and completing regulatory requirements while providing much-needed care to the patients they serve. Additional resources are expended acquiring alternative drugs, negotiating contracts, learning how to safely administer the new agents, and dealing with other necessary tasks.3 While there is no silver bullet, health systems can take proactive steps that may help them avoid or mitigate shortages in their pharmaceutical supply.
Health systems should consider collaborating closely with their wholesale distributor, establishing 2-way communication to strengthen supply chain visibility. Together, they are better able to devise plans on the next move during a shortage. When shortages arise, it’s important to consider clinical alternatives and management. During the COVID-19 pandemic, McKesson developed the Critical Care Drug Task Force, a cross-functional team of clinical pharmacists and supply chain professionals who continue to monitor, communicate, and respond to supply chain trends and needs. During shortages, they seek to share information and provide guidance on where we believe supply volume will go, enabling us to more thoughtfully increase inventory or change its allocation logic to try to ensure drugs get to the patients that need them.
Data sharing also supports greater AI accuracy in projecting demand and product availability. Because AI requires a substantial investment, some organizations collaborate with wholesalers to develop the technology, while others build their own systems. The information gained is of immense value to health systems, assisting in appropriate triage during shortages to help ensure patients receive the products they need.
Everyone Has a Role to Play
Drug shortages have existed for many years, and unfortunately, there is no quick fix. As these shortages come and go, it is imperative that patients have access to the drugs they need. All stakeholders across the drug supply chain must work together to develop and support proactive strategies that will create resilience across the health care ecosystem to avoid and mitigate shortages. By advancing risk mitigation strategies through smart sourcing practices and collaboration with industry stakeholders, we can all make a positive impact in addressing drug shortages and achieve more together. This is a critical mission, as all patients deserve access to therapies that can provide them the best possible outcome.
