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Forum Post: Supply Chain Problems Hitting Hospitals Near You

Posted 7 years ago on April 8, 2013, 8:23 p.m. EST by LeoYo (5909)
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Supply Chain Problems Hitting Hospitals Near You

Monday, 08 April 2013 11:14 By Yves Smith, Naked Capitalism | News Analysis


I’ve taken off and on to writing about devolution, which is when the application of new technology winds up not producing net gains, but at best, questionable tradeoffs, and at worst, net negatives. Consider how cheap carbohydrates like high fructose corn syrup lower the cost of food but almost certainly have contributed to the increase in the incidence of diabetes.

The stealthy “technology” that has been applied across large businesses around the world is the relentless pursuit of efficiency, which too often takes the form of simple-minded cost cutting. It’s not hard to see how this can create all sorts of problems: reduced service levels or product quality leading to customer defections; reductions in investment or maintenance producing catastrophic breakdowns; concentration on a few suppliers to gain more bargaining leverage over them producing vulnerability to problems with those suppliers, whether directly (problems in their operations) or indirectly (changes in shipping, tariffing, or foreign exchange rates making them less attractive, and their size impeding an easy migration to a new source).

Readers have had a bit of schadenfreude in seeing how Walmart has gotten too clever by half and has squeezed both its workers and staffing levels so much that it is undermining critical store operations to the point where the mainstream media has taken notice. But while Walmart’s tsuris are unlikely to have broad negative social ramifications, that’s not true when drug makers become unduly fixated with their bottom lines.

Reader and MD Francois T passed along this sighting from the Denver Post, of hospitals having trouble getting critical medications. The number in scarce supply is 323, the highest level since the database was started in 2001.

His message: “Getting closer to the edge, drug shortages are now affecting simple, everyday drugs in use in any hospital. This is going to end very badly.”

And the reason? From the article:

The current wave of problems stems from simple chemicals such as potassium or magnesium, which nevertheless need careful, sterile manufacturing procedures for hospital injections and drips. They also tend to be low-profit for the manufacturer.

Now this shortage does not appear to be critically dangerous…yet:

Hospital drug shortages nationwide have hit an all-time high, and Colorado pharmacists warn of disturbing new deficits in basics such as electrolytes, epinephrine, dextrose and other common chemicals. Health officials do not yet call the shortages life-threatening, but do say delays and substitutions can create side effects, lengthen recoveries and hit vulnerable populations in ICUs and neonatal care…

Calculating harm to patients is more difficult with an electrolyte shortage than, say, a cancer patient missing a treatment, [Jennifer] Davis [pharmacy director at Exempla Lutheran Medical Center]said. A patient low on electrolytes might simply feel less energetic.

The reason that it might seem OK to squeeze hospitals is precisely that it’s hard to point a finger at the drug companies. But notice the comment that these shortages can affect people in ICUs. It’s not hard to imagine a hospital having to ration limited supplies, say if some sort of disaster (big explosion, natural disaster) led hospitals in an area to have a flood of emergency room patients.

And the savings to the drug companies simply shifts costs onto hospitals and may well increase health care costs overall:

Scrambling to cover the gaps through hospital trades or pharmacy brokers also wastes large amounts of staff time, Colorado health experts said.

But on a more basic level, this is all about a disturbing trend to define corporate missions not in terms of producing terrific products or happy customers, but of placing profits first and viewing everything as secondary. John Kay, in his book Obliquity, showed that studies of companies that paired ones that sought to maximize profits versus those that had loftier aspirations showed that the ones with richer, more complex goals also performed better financially. But it is always easier to follow fads, especially since the stock market is geared toward rewarding expediencies, regardless of whether they put lives at risk.

This piece was reprinted by Truthout with permission or license.



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[-] 1 points by windyacres (1197) 7 years ago

Drug companies are "for profit" therefore the amount of a certain drug they produce depends on how profitable is the drug. They don't care about the people that need these drugs at all! If there are shortages, the price will go up and they will produce more, but have no concern for indiviuals that suffer from shortages.

It is a sad world when society works in this way.

[-] 1 points by LeoYo (5909) 7 years ago

Dean Baker | India Strikes Blow Against Big Pharma

Monday, 08 April 2013 10:34 By Dean Baker, Truthout | News Analysis


Last week, India's Supreme Court rejected the Swiss pharmaceutical company Novartis' patent on the cancer drug Gleevec. While the immediate issue was the ability of Novartis to charge its patent-protected price for the drug in India, the decision will have an enormous impact on the future of public health not only in India, but around the world.

The key issue is whether we will follow a pattern in which patent monopolies are continually lengthened and strengthened. This has been the goal of the U.S. government in trade negotiations led by both Democratic and Republican presidents. The TRIPs provisions of the Uruguay Round of the WTO negotiations were the clearest manifestation of this drive. These provisions, which were added at the request of the U.S. pharmaceutical industry, require countries throughout the world to adopt U.S.-type patent laws. In addition, the United States has sought to further strengthen patent protections in all the bilateral and multilateral trade agreements that it has negotiated over the last two decades.

There is a similar story domestically, where the duration of patents was increased from 14 years in the 19th century to 17 years up until 1994. Currently, the duration is 20 years from the date of filing. More importantly, the United States has a notoriously lax patent system which makes it possible for drug companies to patent almost anything in order to throw obstacles in the path of would-be competitors.

In 1997, there was a famous incident in which an "inventor" was able to obtain a patent on a peanut butter sandwich.

The result of stronger and longer drug patents is incredibly high drug prices. The United States is the only country in the world that effectively gives drug companies a complete monopoly on the production of drugs that are essential for life or health and then lets them charge whatever they want. The result is that we spend almost $300 billion a year for drugs that would likely sell for less than $30 billion in a free market.

This is the context in which the Novartis case must be understood. Novartis had filed for a patent on Gleevec, a highly effective treatment for leukemia. Novartis sells the drug in the United States for $70,000 for a year's dosage. By contrast, India's drug manufacturers can produce high quality generic versions for less than one-twentieth of this price. While the U.S. price would make Gleevec prohibitively expensive for everyone except the richest people in India, the generic version could be affordable for people with insurance or for the government's health care system. The Indian Supreme Court decided that India's patent law did not require it to follow the U.S. model and rubber-stamp any patent that came through the door. It determined that Gleevec was not qualitatively different from the drug from which it was derived, and therefore did not meet the law's requirement that a patent involve an innovation. This means that India's generic manufacturers will be able to continue to produce a generic version of the drug. The importance of this case goes far beyond Gleevec and India. India's generic industry has been providing drugs for much of the developing world over the last two decades. The major drug companies in the United States and Europe would very much like to get rid of this competition. If they could force India to adopt a patent system that ties up potential competitors in endless litigation, then it would accomplish this goal. In the drug companies' dream world, the Indian generic manufacturers would agree to be junior partners, manufacturing brand drugs subject to patent monopolies in exchange for a share of the booty. However, the Court's decision suggests that they are likely to go in the opposite direction, being ever more aggressive promoters of generics in India and elsewhere. The impact of this decision is likely to eventually be felt even in the United States. It will be impossible to maintain disparities in drug prices that could reach into the hundreds of thousands of dollars. Either the drugs will come to the United States or the people will go to the drugs. The cost of travel and hotel stays will be dwarfed by the potential savings.

With luck, this court decision could eventually make the corrupt U.S. patent system untenable. Patent monopolies are an antiquated and incredibly inefficient way to finance drug research. There are other mechanisms to support research: for example, the $30 billion annually spent on research by the National Institutes of Health. Paying for research up front, rather than through government-granted patent monopolies, would eliminate the incentive to lie about the safety and effectiveness of drugs. It would also allow for much faster progress, since all results would be fully public so that researchers could more easily build on each other's findings. The costs of protectionism can be large, as economists frequently point out when discussing 20 percent tariffs in steel or import quotas that raise the price of shoes or shirts by 10 percent. For some reason, they become strangely silent when it comes to patent protection that raises the price of drugs by 1,000 percent or even 10,000 percent.

The U.S. political system may be too corrupt to rein in the wasteful patent system in the United States, but thankfully, India's government and courts are not beholden to the same interests. The ruling of the Indian Supreme Court could turn out to be a momentous victory for people around the world.

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