How rock-bottom prices drive shortages of generic drugs used in hospitals

Steven Coventry spent 20 years at the Akorn pharmaceutical factory in Decatur, Ill., and worked his way up to operations manager.

The plant closed abruptly in February 2023, when the company shut down its four manufacturing facilities. In Decatur, Akorn laid off 400 employees.

But Coventry went back to work at the Decatur plant last summer because new owners hired him to essentially resume his old job and bring it back to life.

It was a surreal scene.

"Coffee mugs were left on tabletops, personal items," he said. "It was kind of like a ghost town and a little sad to go through and see, you know, people's lives just basically upended."

Coventry says the factory used to make 100 different products. The shutdown contributed to new drug shortages and made some others worse.

He's glad to be back.

"It's like home. It's where I grew up," he said. "I was really driven to ... bring it back up to its glory days of what it was in the past."

Low prices bring unintended consequences

When Americans think of drug prices, they usually think that they're too high. And for name brand drugs, that's often the case compared with the rest of the world.

But when it comes to generic sterile injectables, medicines that are workhorses in hospitals, the opposite problem is true. They can be too cheap.

"For off-patent generic drugs, especially those used in the hospital setting, Americans actually pay lower prices than Europe does," said Rena Conti, a professor at the Boston University Questrom School of Business.

Companies compete with each other to offer hospital purchasers the lowest price, driving the prices to rock bottom. Over time, prices can get so low that it doesn't always make good business sense for the companies to keep making some drugs. So they stop.

"It's the same issues that we've been dealing with for many years, especially with these older generic drugs that are having fewer and fewer manufacturers making them," Valerie Jensen, associate director for drug shortages at the Food and Drug Administration, told NPR. "There isn't a lot of buffer when something goes wrong on the manufacturing line."

With fewer suppliers of generic drugs, a weather event – like the tornado that ripped through a Pfizer facility earlier this year or Hurricane Maria in Puerto Rico in 2017 – can wreak havoc on an already fragile system.

On top of that, the bargain-basement prices don't encourage manufacturers to invest in new equipment and other things that would keep quality high and avert recalls and shutdowns.

"I would say, fundamentally, economics is causing this problem, and this problem is long-standing," Conti said. "We've been dealing with periodic and, more concerningly, persistent shortages in drugs ... for the better part of a decade or a little bit more. And fundamentally, the economics of this market has to change in order to get resilient supply."

What happened to Akorn?

Erin Fox is a hospital pharmacist who oversees purchasing drugs, medication safety and more for the University of Utah Health System. Like her peers across the country, she was caught off guard by Akorn's demise last winter.

"We actually got an email from our representative and he just said, 'Hey, we just walked in today. We learned that we're closing. Everyone has to leave today,' " she said. "So it was very abrupt."

The company went bankrupt after operating at a loss "for some time" and failing to get acquired by a company that would cover its liabilities, Akorn's CEO said in a letter to employees last February that was obtained by the Herald and Review in Decatur.

As soon as Fox got the news, she and her colleagues at University of Utah Health started poring over lists of medicines to see how the shutdown would affect them. Fox's team asked their Akorn rep if they could use what they had on shelves, and the answer that day was "yes."

The relief wouldn't last.

Six weeks later, Akorn recalled all the products it had made. There was nothing wrong with the drugs, and they hadn't expired. But no one was left at Akorn to answer the phone or initiate a specific recall if a problem did emerge.

"So you can't use it anymore," she said of Akorn's product line. "There's no gray area there."

Staffers at University of Utah Health had to log an extra 250 hours right away to deal with the fallout, taking Akorn products off shelves and finding replacements.

Products included things like the opioid sufentanil, which is often used in epidurals during labor and delivery. There are alternatives, but anesthesiologists prefer working with what they know best to reduce the chances for medical errors.

Akorn was also the only supplier of dimercaprol, an injectable antidote for lead poisoning. There are oral alternatives, but some patients are too sick to take them.

Rising from Akorn's ashes

A few months after Akorn shut down, Rising Pharmaceuticals acquired the former Akorn factory in Illinois. Rising plans to manufacture several of the generic products Akorn used to make there.

"Our intention is to really focus on those products of greatest need in the U.S. pharma marketplace and bring those back on," Ira Baeringer, Rising's chief operating officer, told NPR.

These include injectable forms of the antibiotic levofloxacin, the anesthetic tetracaine and droperidol, a medication to prevent nausea. Rising also plans to bring back several former Akorn eyedrop products in short supply.

But getting the factory up and running again is tricky because the water, air and mechanical systems had been shut down for so long. Normally, those systems run continuously.

"That takes a lot of time. It takes a lot of effort," Baeringer said. "And once a facility is shut down, it means all those systems have to be revalidated. And so that's the process that we're going through right now to bring ... this facility back up into commercial production."

He said Rising hopes the factory will be making products by the second half of 2024.

But what will keep Rising from going the same way Akorn did?

"Honestly, there's probably very little that can happen to prevent it," said Fox of University of Utah Health, explaining that it will depend on many factors, including which products Rising chooses and how it prices them. "So I think it's really hard to know if they'll be able to make it a success or not."

She said she hopes Rising can get a leg up from "people that want to keep manufacturing in the U.S."

The Biden administration has taken steps toward mitigating drug shortages, including expanding its use of the Defense Production Act to bolster domestic manufacturing of medicines deemed critical for national defense. The administration is also investing $35 million in domestic manufacturing of key starting materials for sterile injectable drugs.

"I'm hopeful," Fox said of the Illinois factory. "But we'll just have to see how it works out."

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