Collusion or Coincidence: The Making of a Drug Shortage

08/18/2017 11:43 am ET

Multiple pharmaceutical companies stopped producing a commonly prescribed blood pressure medication at the same time and for no apparent reason. Was this the result of collusion or merely a coincidence?

I admit, I’m in no position to judge either way, but here’s the story:

About two months ago a patient of mine received a letter from his mail order pharmacy telling him that one of his blood pressure medications, atenolol, was “unavailable from the manufacturer.” He was also told that his doctor (me) might want to switch him to another medication. Like many of my patients, he had been taking atenolol for several years and it had controlled his blood pressure very well with minimal complications. Since then, several more of my patients have gotten the same news about atenolol from different pharmacies.

There are other drugs that treat high blood pressure the same way as atenolol (beta blockers) but atenolol is effective, well tolerated and convenient because it only has to be taken once a day. It’s also very affordable; pharmacies have paid no more than 3¢ a pill for all doses of generic atenolol for years. So, why have pharmacies throughout the U.S. suddenly run short of this inexpensive and commonly prescribed medicine?

If a drug is made by only a single pharmaceutical company there can be a shortage if that company runs into problems. But atenolol is made by no less than six different pharmaceutical companies. Four of those six companies: Zydos, Sandoz, Teva and Mylan, reported to the FDA that atenolol was “backordered” almost simultaneously in late July. Of these four companies, only one of them (Zydos) gave any reason for this shortage. Zydos claimed they were out of atenolol due to an increase in demand for the drug. Two other companies that make atenolol (Almatica and Major) haven’t yet reported anything to the FDA, but also claim to be out of the drug.

Now it’s important to note that the only reason a pharmaceutical company would be out of a drug for so long is if they stopped making it.

Are there legitimate reasons six independent companies would all run out of the same drug at the same time? Perhaps. A shortage of raw ingredients could explain this, but that’s hard to imagine here because atenolol is not a very complex drug chemically, and there have been no such shortages reported.

Was there a sudden huge spike in the number of patients using atenolol? No, this was clearly caused by a drop in the supply. I’ve spoken to multiple pharmacists from several different pharmacy chains and they’ve all told me the same thing: they haven’t been able to get any atenolol from their suppliers.

Another reason for this shortage might be that all the machinery used to make atenolol broke down at the same time in every company that made it, and they couldn’t get spare parts… but that seems very unlikely.

There’s also a rather dishonest reason six pharmaceutical companies might simultaneously “run out” of the same drug. They might do this to give them an excuse for increasing the price of that drug (to increase profits). This strategy wouldn’t work if only one or two companies stopped making a drug but, if (hypothetically) all six companies agreed to simultaneously limit supply, they could use this shortage as a pretext to drive the price up substantially.

Such agreements, while profitable, are also highly illegal. Again, I can’t be sure this is happening here, but I can tell you that collusion between major corporations is apparently quite common. The reason collusion of this sort is so common (even though it’s illegal) is that it’s hard to prove conclusively and, when used properly, it can earn the colluding companies a lot of extra money.

For example: last December the Attorneys General of 20 different states filled charges accusing six generic pharmaceutical companies of colluding to fix the prices of at least two (and possibly many more) generic drugs in the past. The six companies in this case are: Mylan and Teva (again), Citron Pharma, Heritage Pharmaceuticals, Aurobindo Pharmaceuticals and Mayne Pharmaceuticals.

You’re probably already familiar with Mylan pharmaceuticals because they’ve been in the news a lot lately. Last year Mylan’s CEO had to testify before Congress about the price of their EpiPens.

So far there have been guilty pleas from two of Heritage’s executives in the case filed last December. More guilty pleas (or verdicts) might follow as this case progresses, but the prices of the drugs in question increased by more than 1000% as a result of this alleged price fixing. This alleged collusion might also partly explain the fact that the average price of more than a thousand generic medications sold in the U.S. increased by more than 50% in 2013 alone.

How do colluding companies fix the price of a product? One way is to first create a shortage of that product. The best way to create a shortage of any product is for all of the companies that make it to agree to stop making it for a while, which is exactly what is happening with atenolol right now.

Again, I’m not saying that I know this is the reason all of the pharmaceutical companies that previously made atenolol stopped making it at the same time. I’m just having trouble finding a more innocent explanation for this rather extraordinary, er… coincidence? The good news is that we’ll probably find out pretty soon. If we notice, for example, that atenolol is suddenly available again, but at a substantially higher price, we’ll at least know why (or have a good reason to suspect).

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