Urgent action is needed to address America’s historic drug shortage

By Nick Iacovella

The United States is facing an unprecedented drug shortage: at the beginning of 2024, there were a record 323 active drug shortages – the highest number since 2001. This crisis is caused by two main factors: subsidies from foreign governments and regulatory failures by the U.S. Food and Drug Administration (FDA).

America has become dangerously dependent on foreign manufacturers—particularly in China and India—for generic drugs, which account for 91% of all U.S. prescriptions. In 2000, China and India accounted for 25% of global drug approvals. In 2021, India accounted for 62% of approvals, while China accounted for 23%. Today, these two countries dominate the U.S. market and supply the majority of our country’s generic drugs.

America’s current dependence on drug imports is due in large part to the massive subsidies the Indian government provides to the generic drug industry. This is a major factor in the shift of domestic manufacturing abroad, leaving the U.S. dangerously dependent on Indian drug factories that often violate FDA regulations.

The FDA’s failure to adequately inspect and regulate many of these foreign plants has also exacerbated the drug shortage crisis. Although numerous violations have been identified at foreign factories, FDA oversight remains inconsistent and inadequate. In India, there is an alarming lack of regulatory oversight, which has led to serious complications – and even death – in patients. Generic cough syrup from India has killed dozens of children, and other drugs have been contaminated or caused blindness.

Despite these serious problems, FDA inspections of foreign drug factories have actually declined sharply. In 2019, the FDA inspected 37% of nearly 2,500 foreign manufacturers. By 2022, inspections dropped to 6% of about 2,800 manufacturers—including only 3% of Indian manufacturers.

The FDA’s inadequate oversight has created a legal loophole that allows foreign manufacturers to produce substandard drugs with minimal consequences. This now impacts patient safety in the U.S. because the FDA has no choice but to allow drug imports from non-compliant foreign manufacturers.

Last year, due to a nationwide shortage of cancer drugs, the FDA allowed Chinese drugmaker Qilu Pharmaceutical to ship an unapproved cancer drug to the U.S. It also allowed a banned Indian factory to ship the lung drug atovaquone to the U.S.

Valerie Jensen, the FDA’s deputy director for drug shortages, recently warned that the downward pricing strategy of foreign manufacturers is leading to shortages. Imports of essential hospital products such as sterile generic injections have become so cheap that it is no longer profitable for domestic companies to continue production. FDA Commissioner Robert Califf also warned of inadequate reserves of generic drugs in the United States and called for a reassessment of the industry’s economics.

Congress must address these shortages in the generic drug industry. But solving America’s drug shortages requires more than a single solution—it requires a comprehensive approach.

First, there is an urgent need to rebuild domestic production of essential medicines. Senate Majority Leader Chuck Schumer (D-N.Y.) has proposed a four-point plan that would incentivize domestic production and improve safety. Helpfully, the PILLS Act, introduced by Congresswoman Claudia Tenney (R-N.Y.), would accomplish this through a production-based tax credit, investment tax credits, and domestic premiums to encourage the reshoring of U.S. production of generic drugs.

In addition to encouraging domestic production, Congress must also reform the FDA to ensure it can effectively oversee foreign drug manufacturers. This includes increasing the frequency and rigor of foreign inspections and closing loopholes that allow non-compliant manufacturers to operate with impunity. The FDA must also improve its ability to obtain accurate information from foreign manufacturers about the quality of their drugs.

Urgent action is needed to address America’s drug shortages. These steps will enable the United States to secure its drug supply chains and ensure patients have access to safe, high-quality, and reliable medicines.

Nick Iacovella is senior vice president at the Coalition for a Prosperous America. You can follow him @nickiacovella