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How Medicare Subsidies May Have Caused U.S. Medication Shortages

Wednesday June 8th, 2011   •   Posted by Craig Eyermann at 4:41pm PDT   •  

The news from America’s hospitals as recorded by the Associated Press sounds dire:

A growing shortage of medications for a host of illnesses — from cancer to cystic fibrosis to cardiac arrest — has hospitals scrambling for substitutes to avoid patient harm, and sometimes even delaying treatment.

“It’s just a matter of time now before we call for a drug that we need to save a patient’s life and we find out there isn’t any,” says Dr. Eric Lavonas of the American College of Emergency Physicians.

The problem of scarce supplies or even completely unavailable medications isn’t a new one but it’s getting markedly worse. The number listed in short supply has tripled over the past five years, to a record 211 medications last year. While some of those have been resolved, another 89 drug shortages have occurred in the first three months of this year, according to the University of Utah’s Drug Information Service. It tracks shortages for the American Society of Health-System Pharmacists.

Let’s do some math, shall we? If the number of medications in short supply has tripled over the past five years to 211 last year (2010), then that means that there were approximately 70 medications counted as being in shortage in 2006.

So something likely happened in 2006 that caused the number of shortages of various medications to increase incrementally in each year afterward. We say “incrementally” because the shortages of medications would have been big news several years ago if it had happened more suddenly.

Perhaps we can deduce what might be behind the increasing number of drug shortages by discovering exactly where medications are becoming increasingly in short supply in the U.S.:

The vast majority involve injectable medications used mostly by medical centers — in emergency rooms, ICUs and cancer wards. Particular shortages can last for weeks or for many months, and there aren’t always good alternatives.

As we’ve seen before, the people who are most likely to use emergency rooms, and we suspect ICUs and cancer wards, are people who already have health insurance coverage, so we should first focus on this group to see what changes might have taken place in the last five years that might account for the shortages that have developed over that time.

But let’s see if we can narrow things down more by asking who in America is the most likely to both have health insurance and to be consuming medical resources in America’s medical facilities? Gallup reports the results of its June 2009 survey on the topic:

Those aged 65 and older, and thus eligible for Medicare, are among the least likely to be uninsured, at 3.6%.

Those aged 65 and older are also the statistically most likely to be consuming medical resources in quantity.

With that being the case, we would first look for some kind of change that took place in 2006 in Medicare that might account for a sudden increase in the demand for the medications consumed by Medicare beneficiaries.

Lo and behold, we find such a change! The Kaiser Family Foundation provides a timeline for recent changes in Medicare coverage, and specifically identifies a major change that took effect on 1 January 2006:

  • Part D coverage begins for all beneficiaries enrolled in a plan
  • Dual eligibles’ auto-enrollment takes effect
  • Low-income subsidies for Part D coverage begin
  • Medigap insurers prohibited from selling new policies with drug coverage

Part D coverage of course refers to Medicare’s drug benefit, which covers much of the cost of medications for Medicare beneficiaries, and which was not covered by Medicare insurance before 2006. We’ve highlighted “low income subsidies” in the list of changes that took effect on 1 January 2006 because these subsidies, by lowering the cost of medications to Medicare beneficiaries, would drive up the demand for them, thereby consuming more of the available supply.

That increase in demand would provide for an immediate increase in the amount of medications consumed. Especially for those age 65 and older, who are the most likely to be the patients in both the U.S. and the world‘s emergency rooms, ICUs and cancer wards with respect to their numbers in the population, who also draw upon the available care for longer periods of time, and thus consume more resources per patient than younger patients.

But we wouldn’t necessarily see the effects of that change in demand right away, as first, the existing stockpiles of medications would have to be drawn down before a shortage would take hold. The chart below shows how the number of medications affected by shortages has changed in each year from 2005 onward:

Scarce Stock: Number of U.S. Medication Shortages, 2005-2010

And that’s exactly the pattern we do see, as it is not until 2007 that we see the number of shortages begin to rise.

The Lancet Oncology spells out what this means to Americans seeking medical treatment and prescribes a solution:

Drug shortages mean that patients are not given the best treatment or that their treatment might be delayed. Legally, non-FDA-approved drugs (including foreign-made versions of USA-approved drugs) cannot be imported into the USA, and perhaps a solution would be either to relax some of the laws (with appropriate safeguards) to allow the import of life-saving treatments or to incentivise increased production in US facilities. Either way, a long-term solution is urgently needed to prevent needless loss of life.

Who knows what the shortage situation will be in the next several years as those in the leading edge of the baby boom generation begin turning 65 this year, as substantially more people become eligible for Medicare’s medication subsidies.

Image Credit: FDA Lawyers Blog

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June 2011