trending Market Intelligence /marketintelligence/en/news-insights/trending/EMh9YiEUKOz6h2Zndv3HVA2 content esgSubNav
In This List

Baxter, Pfizer drug shortages leave US hospitals scrambling for basic medicines


Baird Research is Now Exclusively Available in S&P Global’s Aftermarket Research Collection


Japan M&A By the Numbers: Q4 2023


Essential IR Insights Newsletter Fall - 2023

Case Study

A Corporation Clearly Pinpoints Activist Investor Activity

Baxter, Pfizer drug shortages leave US hospitals scrambling for basic medicines

Manufacturing delays at Baxter International Inc., Pfizer Inc. and AmerisourceBergen Corp.'s PharMEDium unit have fueled nationwide shortages of basic medicines, leading some U.S. hospitals to formulate action plans rationing critically low products.

At the University of Virginia Health System, which annually sees more than 62,000 patients through its emergency room and performs 24,000 surgeries in its operating rooms, the low stock of narcotics, antibiotics and basic intravenous fluids such as saline and sterile water have led to up to a dozen advisories a week on these products' uses.

"The shortages are so severe that our hospital and pharmacy supply chain teams must review supply levels and backorders at least three days per week," Danielle Griggs, pharmacy supply chain manager at the UVA Health System, said in an interview.

Hurricane Maria's path through Puerto Rico hit the main manufacturing plant of Baxter, one of the largest makers of the IV fluids used in surgical and other hospital procedures. As production stalled amid islandwide power outages and destroyed infrastructure, an initial wave of IV fluid shortages reached hospitals.

It then snowballed. Griggs said that as health systems turned to alternative IV solutions and medicines, additional shortages in saline vials, sterile water, sterile empty syringes and sterile empty fluid containers began to rack up. At the same time, national shortages of narcotics used in surgery and pain care also began to grow due to unrelated manufacturing issues.

There are 163 reported shortages listed by the industry group the American Society of Health-System Pharmacists, or ASHP.

SNL Image

This product count is not as high as it has been in the past, but the medicines out of stock right now affect nearly every aspect of hospital care, said Erin Fox, senior director of drug information at the University of Utah, which provides the shortage information for ASHP.

"When you have shortages of really basic products like small-volume saline, and opioid syringes like morphine and hydromorphone that are used in every surgery — the workload is pretty devastating right now," Fox said.

As the saline shortage worsened, the U.S. Food and Drug Administration permitted IV fluids from non-U.S. manufacturers such as Fresenius SE & Co. KGaA's Kabi unit and Grifols SA. FDA Commissioner Scott Gottlieb suggested in a January statement that the agency would explore pushing back expiration dates on current stock.

Shortages: 'The reasons haven't changed'

While Baxter's drug shortages can largely be traced to Hurricane Maria's damage, most of the other backlogs have nothing to do with the weather disaster.

Baxter declined to comment but pointed S&P Global Market Intelligence to a webpage detailing its response to the hurricane.

"Unfortunately, for almost all of the drug shortages right now, the reasons haven't changed," Fox said. Because so many of these medicines are generic and relatively inexpensive, there simply are not many manufacturers producing them — so when one has a hitch, the others often cannot shoulder the demand for products, Fox explained.

SNL Image

Pfizer acquired one such manufacturer in 2015, buying Hospira for $17 billion to become one of the largest makers of generic injectable drugs. However, the company has since struggled to smooth out manufacturing issues that plagued Hospira well before the acquisition.

Pfizer notified clients Jan. 31 that production on its Carpuject and iSecure prefilled syringes — the tools used to dispense a spectrum of medicines including opioids Demerol and Buprenex, and local anesthetic Carbocaine — would be interrupted "due to an issue with a third-party incoming component." The supply of many of these drugs is not expected to recover until mid-2019, according to the company's letter.

Pfizer is working with the supplier to remediate the root cause and determine the impact on existing inventory, Steve Danehy, the company's director of corporate affairs, said in a statement provided March 7.

"We hope to provide an update in March. However, at this time, we are unable to release additional product," Danehy said. On March 6, Pfizer recalled a range of Hospira-made hydromorphone, a commonly used pain medicine, citing cracked and empty vials.

Even when the drugs are available, other key processes have stalled and sometimes left hospitals under pressure.

PharMEDium, which processes drugmakers' products into individual doses for a range of hospital uses, has also fallen behind on demand since its largest facility, in Memphis, Tenn., halted production for an FDA investigation into compliance issues.

AmerisourceBergen executives said in the company's Feb. 6 earnings call that they expect the Memphis facility, which is responsible for half of its compounding production, to be running on schedule within the first three months of the year. In a statement to S&P Global Market Intelligence, Bennett Murphy, director of corporate and investor relations, reiterated that goal.

Not every hospital has the capability to put their own small dosages and syringes together, and even when they do, as UVA Health System can, strict national safety protocols can translate into expensive and complex processes.

"It certainly causes hospitals to think about in-sourcing all of their compounded products, and many hospitals are undergoing this assessment to determine if it's possible," Griggs said. "But there's also a risk in in-sourcing it to that scale. You have to balance the supply, the risk, and the financial component."

Curing the current shortage

Part of the broader drug shortage issue, which Fox has been monitoring since 2001, is that companies are not required to have a backup plan, she said. They have been required only recently to disclose product shortages to the FDA, following the 2012 passage of the Food and Drug Administration Safety and Innovation Act.

"That law has actually helped the FDA prevent shortages from happening in the first place. I think that's a big part of why we have a lower number of shortages right now," Fox said.

Griggs noted that while the FDA's admission of certain non-U.S. drugs has improved the situation, it has not resolved it.

In the meantime, health systems are grappling with the workload of channeling new vendors and different products into inventory and smooth clinical use. The UVA Drug Shortage Task Force — as the health system calls the team of physicians, nurses, pharmacists, supply chain and IT specialists — has put significant effort into maintaining safety and quality measures even as product switches continue, Griggs said.

It can also be a vital pre-emptive measure. Fox noted that during a similar morphine shortage in 2010, safety watchdog the Institute for Safe Medication Practices reported that two patients, in unidentified health facilities, died of hydromorphone overdoses after mistakes in the drug's administration.

"We know it wasn't safe the last time we had a shortage," she said. "And we're looking at a really long time until this shortage gets better."