Transcript of Q&A by Dr. Paul Gosar on the drug shortage crisis

House Oversight and Government Reform Committee 

“Drug Shortage Crisis: Lives are in the Balance” hearing held on Nov. 30, 2011 by the Subcommittee on Health Care, District of Columbia, Census, and the National Archives

Transcript of Q&A by Dr. Paul Gosar (R-Ariz.):

Dr. Paul Gosar (R-Ariz.). IMAGE SOURCE:

Dr. Paul Gosar (R-Ariz.):

“You know, as a health care professional, I look at symptoms and I don’t treat symptoms. I’m looking at what the disease process is.

“So is the gray market – I want to ask as a yes or no going down the row – is the gray market a symptom or is it the disease?”


Dr. Michelle Hudspeth, Division of Pediatric Hematology/Oncology of Medical University of South Carolina:

“It’s a symptom.”


Walter Kalmans, President of Lontra Ventures:

“It’s a symptom.”


Ted Okon, Executive Director of Community Oncology Alliance: 



Dr. Scott Gottlieb, Resident Fellow at the American Enterprise Institute:

“It’s a consequence. It’s a symptom.”


Dr. Kasey Thompson, Vice President of Policy, Planning, and Communications for the American Society of Health-System Pharmacists: 



Dr. Paul Gosar (R-Ariz.):

“Thank you. So what we really need to do is to concentrate back on the cure – back to the disease process.

“So it seems to me like we’ve got something going wrong here and we need to get back down to it.

“There are some clear problems in the way that we’re addressing the drugs themselves. Very quickly, can you give me an idea on how we can do this? Because it seems like arbitrarily allowing bureaucrats to set – anywhere it seems the federal government is involved, we’ve got problems. When we’ve got somebody outside the business of medicine dictating to medicine, we tend to get bigger problems.

“So real quickly, is there a way that you can see that we can simplify this and let the markets work but also have some controls – very simple – but also allow the patients to have skin in the game? Doctor, what do you think?”


Dr. Michelle Hudspeth: 

“I think there’s going to have to be an allowance for the market to work for the prices to reach market value. There are clearly still some drugs that would benefit from regulation that will allow us to treat the greatest number of patients overall. So it may not be that we abandon some of the tenets of the MMA [Medicare Modernization Act of 2003] all together.

“But I think it’s clear that in the generic injectable industry, it’s a very different beast. So there probably needs to be allowances made differently for these types of drugs. And so is it that we grant exclusivity, even though it’s a generic drug, for a certain period of time? Do we offer financial incentives for the production? So is it maybe focusing on incentives for production and good manufacturing process, which helps everything perhaps even over just the price of the drug itself and that may be able to be better controlled when focusing on overall incentives to a company?”


Walter Kalmans:

“There are several different kinds of solutions to look at. I’ll give an example of one. We know that there’s a rapid price decline when drugs go generic. Right now, they’re limited from price increases of a maximum of 6% based on the ASP [average sales price] legislation. One idea might be to look at changing for drugs that have been generic for a couple of years changing the ASP to ASP plus 20% as an incentive as to allow prices to have greater fluctuations to make sure that the profits can continued to be earned and generics are priced at a market price that’s palatable.”


Dr. Paul Gosar (R-Ariz.):

“I know we’re going to put up a slide for Mr. Okon, but this actually shows that just one drug, Clorpactin, that you can see how much it has decreased. So this gives you an example of one idea. Mr. Okon?”


Ted Okon:

“I think that, Dr. Gosar, that what has to happen is that I think that on the manufacturing side there has to be some clear incentives, whether we look at tax credits or something else that basically [incentivize] not only manufacturers coming into the market but manufacturers staying in the market over a period of time.

“I think it’s very clear on the reimbursement side, we need to do something differently and we need to do something immediately with these drugs. You have to realize that some of these drugs are what we talk about as being even underwater – that their cost is higher than the reimbursement for Medicare right now. And because Medicare cancer care basically accounts for 50% of the costs, it has an inordinate influence on private payers as well too. So this is having a consolidation factor. We’re seeing consolidation on the provider side; we’re seeing consolidation on the manufacturing side. I think we have to do something.

“One of the things is when a new product comes into market and there’s not an established ASP, it’s basically WAC plus 3% – wholesale acquisition cost plus 3%. Maybe we need to do something like that in terms of on an immediate basis.

“But I have to say this: whatever we do, we have to put the politics aside right away. We have to get in a room and come up with some solutions, because this really is a crisis.”


Dr. Scott Gottlieb: 

“I think we need to go to a different pricing scheme, and I advocate in my written testimony looking at the wholesale acquisition costs, which might allow producers to take and sustain price increases that would allow investments in facilities.

“I think the regulation of the facilities needs to be uniform so we don’t have the cost of goods going up for one manufacturer but not for others.

“I think there are schemes that we can think of that would allow some limited rebranding of these products so that manufacturers can make representations about the manufacturing qualities that they might allow them to either sustain higher prices that market or get government purchasing programs like VA or others.

“The other thing that I think this committee might think about is the fact that a significant portion of the manufacturing capacity that’s offline right now have been taken offline by the Food and Drug Administration. If you just look at the first five companies that the Ranking Member mentioned – APP, Bedford, Hospira, Tabuk, and Sandoz – it’s probably 80% of the parenteral market. You might have upwards of only 20% of the manufacturing capacities of those companies offline right now, if I’m just thinking of a couple of those companies. Those manufacturing facilities are going to be coming back online, and as they do, they’re going to hit the FDA with literally hundreds, if not thousands, of supplements. The question is if the regulatory agency is prepared to approve those and evaluate them in an efficient fashion.”


Dr. Kasey Thompson: 

“Mr. Davis has mentioned involving manufacturers in this process. My organization has been researching drug shortages for 10 years now. One thing we do is we conduct a root causes analysis, and we ask every stakeholder in the supply chain what’s causing this, what would help, what’s the issue.

“Getting insights from pharmaceutical manufacturers is a challenge in terms of what are the issues, what would the incentives be, and we would really like to get some answers to those questions from the manufacturers’ standpoint. What specific incentives could be provided to you by the federal government to help you stay in this business, get in this business, ramp up supply. I would strongly encourage this committee and others to have a discussion with pharmaceutical manufacturers and see if you can get some better sense of, from their perspective, what the incentives would be that would help them be in these businesses that are so critical to our patients.”


Second Round Q&A:


Dr. Paul Gosar (R-Ariz.):

“Dr. Hudspeth, you really brought this to a T is that there’s this oncology, there are these drugs that are a problem right now but there are also anesthetics and antibiotics. So this is a multifaceted problem.

“It seems to me that we’ve got a number of problems, which was just alluded to here, that instead of having a wide variety of manufacturers, we’re down to several or two or three. So when there’s a glitch, we got a problem.

“Number two is we’ve got a problem with the FDA, and I want to get back to you, Dr. Gottlieb, in making the FDA a little more nimble. Instead of being antiquated to shut everything down, they start to work with industry.

“But it seems like it’s the rules, the regulations, that have really… Don’t get me wrong. We need them, okay? But we need to have a constant vigilance about applicability and how things fluctuate and work. Nothing follows an equation all the way across the board just like every cancer patient isn’t treated the same way.

“So to me, it seems like the system itself is all out of whack and not just reimbursement rates are not the key here. And I’m tired. I like going for the surgery, okay? Go right to the point. We’ve got to do something different than what we’re doing. It’s not working. It’s definitely not working, and we need to revamp this.

“We need to openly talk about the business of medicine frankly. I’m great at this because I’m a dentist, okay? I’m one of those people that can talk to you. There’s nothing wrong about making a profit. You’ve got to make a profit in keeping your doors open. It frankly has to come about.

“So when I see these, there’s another part of this equation that bothers me. It’s that when you’re having to huddle around deciding who gets what, there’s a liability issue there, is there not, doctor?”


Dr. Michelle Hudspeth: 

“Absolutely. So we sit around and say, ‘Do we need to call the hospital risk management? Should we have the ethics committee here?’ How do you being to make these decisions? Absolutely.


Dr. Paul Gosar (R-Ariz.):

“Dr. Gottlieb, I want to go back to you and your background, particularly with the FDA. I know that when we see a glitch in manufacturing the FDA tends to be very calcitrant in shutting everything down instead of being more interactive and maybe looking at one part of that. How do you see the FDA changing a little bit that could help this scenario? Not just with the cancer drugs but all the way across the drug shortage?”


Dr. Scott Gottlieb: 

“Right. Well, I think the agency has and had legitimate concerns around a lot of the remediations that it’s forced. Some of the capacity that’s frankly offline right now as a result of the FDA action is contribution from the manufacturing process that should never get into the sterile injectable drugs, and that was a lot of the problem with some of the things that they’ve shut down.

“Thinking of a couple of things that the agency could do. The agency right now prioritizes the supplements for drugs when they approach shortage status or when they’re in shortage. I think they can prioritize all the supplements – the manufacturing supplements – for all the sterile injectable drugs. Because what could happen is a supplement can sit in the queue now and two years from now that drug could be in shortage. But I believe that some of the drugs that are currently in shortage, one of the contributing factors is because supplements might not have been reviewed in a timely fashion one or two years ago. To do that, the agency is going to need to put more chemist reviewers on these supplements. I think as part of the generic drug users fees program as being considered by this Congress, you could prioritize resources directly for all the sterile injectable drugs and not just segregate them once they get into shortage.

“I think you can think about changing the regulations to make it easier to make manufacturing changes and improvements and undergo remedial steps but without having to file supplements every time; it’s a very cumbersome process. The other problem here is that the agency and the manufacturers, for that matter, don’t understand the root causes of a lot of these problems. So what happens is entire factories get shut down, entire product lines get refurbished. I think there needs to be more work done to try to understand how some of these problems arise in the first place. There’s just not a lot of intelligence in the regulatory side or the manufacturing side for that matter.”


Dr. Paul Gosar (R-Ariz.):

“Dr. Hudspeth, you know I’m from Arizona, rural Arizona. A little different when it’s coming from hospitals in rural America, because we’re at another disadvantage much more than metropolitan. I mean, you know, now we’re talking about surgeries that are being rescheduled, putting people on a prioritization based upon the drugs that we have available for anesthesia. Do you see that from the standpoint from outlining areas as a problem?”


Dr. Michelle Hudspeth:

“Absolutely. I mean, we’ve actually shipped drugs to another children’s hospital in our state because they didn’t have any cytarabine for a little boy with AML. So we try to band together and help other folks when we have the capacity to do that. But we’re hearing widespread shortages at many, many other children’s hospitals.”


Dr. Paul Gosar (R-Ariz.):

“So I guess what my whole point is we’re seeing a symptom again. This may be just a small choreographed part of drugs but there’s more coming, and that’s the biggest problem.”


Dr. Michelle Hudspeth: 

“Exactly. There’s no reason to think this is going to end any better any time soon.”


Dr. Paul Gosar (R-Ariz.):

“Thank you.”



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