Public Health

FTC eyes how “middlemen” contribute to generic drug shortages

Andis Robeznieks , Senior News Writer

The Biden administration will be scrutinizing the practices of pharmaceutical drug “middlemen” groups—such as group purchasing organizations and drug wholesalers—to determine whether their actions are contributing to generic drug shortages, Lina M. Khan, chair of the Federal Trade Commission (FTC), announced at the AMA National Advocacy Conference in Washington.

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In a joint action with the Department of Health and Human Services (HHS), the FTC has asked physicians and others to offer comment on market concentration and contract pricing. The aim is to assess how group purchasing organizations and wholesalers impact the generic pharmaceutical market and how they may be affecting the affordability and availability of generic medications used to treat a wide array of conditions. The deadline to submit comments is April 15.

Kahn told the physician advocates and medical society staffers attending the conference that she has heard how “the business of health care today forces many of you to subordinate your own medical judgement to corporate decision-makers at the expense of patient health.”

“At every layer, these stories reveal how corporate middlemen can have an outsized say in how you do your jobs as physicians, and more broadly, in the type of care that patients receive,” she said. “You all have seen firsthand how these persistent and acute drug shortages can, for very sick patients, mean the difference between life and death.” (Watch Kahn’s speech.)

The AMA has long-standing policy to work with the FTC, Food and Drug Administration and others “to identify and promote adoption of policies to address the already high and escalating costs of generic prescription drugs.”

Find out why it’s time for new ideas to address rising drug shortages.

The FTC will also be looking at health care industry consolidation and Kahn noted that “empirical research shows that hospital consolidation routinely results in higher costs and reduced service.”

A 2023 AMA issue brief on hospital consolidation (PDF) noted that hospital markets are highly concentrated (92% in 2017) and that 76% of hospitals were members of health systems in 2017.

The issue of industry consolidation was mentioned by other speakers at the advocacy conference, including Rep. Ami Bera, MD (D-Calif.). An internist and former Sacramento County chief medical officer, Dr. Bera said that private equity interests that buy health care practices and facilities “are going to focus on profit and not patient care—and that will lead to more physician burnout and the loss of joy in practicing medicine.”

The FTC has blocked seven health care mergers in the last two years, Kahn said.

“We hear that corporate dealmakers are increasingly assessing the legality of the transaction at the beginning of the process rather than at the end, and that some mergers are no longer making it out of the boardroom if the antitrust risk is viewed as high,” she added. “As a law enforcer, deterring illegal deals is a mark of success.”

Kahn also noted that the FTC has proposed a rule to outlaw noncompete clauses in employment contracts.

“Whether you’re a doctor, a nurse, or a custodian, you should have the freedom to pursue better job opportunities without having to uproot your family or risk being sued,” she said. “And, for health care workers in particular, you should be able to do that without having to disrupt continuity of care for your patients.”

Last June, the AMA House of Delegates adopted policy supporting a ban on many noncompete provisions.

“Allowing physicians to work for multiple hospitals can enhance the availability of specialist coverage in a community, improving patient access to care and reducing health care disparities,” AMA Trustee Ilse Levin, DO, MPH & TM, said at the time.

“We must keep in mind,” Dr. Levin added, “that owners of private practices often invest heavily when hiring and training physicians, and those owners may believe that they need to use reasonable noncompete agreements to compete with large hospital systems or other dominant institutional employers. Preserving and fostering independent physicians and other physician-led organizations is crucial to a healthy nation.”

Kahn also noted the FTC’s work in strengthening the federal health breach notification rule and ensuring that companies that collect patients’ sensitive health data must protect it and not share it.