FTC, HHS Seek Public Comment on Generic Drug Shortages and Competition Amongst Powerful Middlemen

Today the Federal Trade Commission (FTC) and the U.S. Department of Health and Human Services (HHS) jointly issued a Request for Information to understand how the practices of two types of pharmaceutical drug middlemen groups—group purchasing organizations (GPOs) and drug wholesalers—may be contributing to generic drug shortages. 

In the Request for Information (RFI), the FTC and HHS are seeking public comment regarding market concentration among large health care GPOs and drug wholesalers, as well as information detailing their contracting practices. The joint RFI seeks to understand how both GPOs and drug wholesalers impact the overall generic pharmaceutical market, including how both entities may influence the pricing and availability of pharmaceutical drugs. The joint RFI is asking these questions to help uncover the root causes and potential solutions to drug shortages. 

“For years Americans have faced acute shortages of critical drugs, from chemotherapy to antibiotics, endangering patients,” said FTC Chair Lina M. Khan. “Our inquiry requests information on the factors driving these shortages and scrutinizes the practices of opaque drug middlemen. We look forward to public input as we assess how enforcers and policymakers can best address chronic drug shortages and promote a resilient drug supply chain.”

“When you’re prescribed an important medication by your doctor and you learn the drug is out of stock, your heart sinks,” said Secretary Xavier Becerra. “This devastating reality is the case for too many Americans who need generic drugs for ADHD, cancer, and other conditions. Today’s announcement is part of the Biden-Harris Administration’s work to tackle health care monopolies and lessen the impact on vulnerable patients who bear the brunt of this lack of competition. Today’s initiative is just one more action by HHS to best address shortages of generic drugs.” 

GPOs serve as intermediaries in the pharmaceutical industry by negotiating deals for generic drugs and other medical supplies between health care providers—including hospitals, physicians, nursing homes, and home health agencies—and manufacturers, distributors, and others who sell to health care providers. Drug wholesalers are another type of intermediary group which purchase drugs directly from manufacturers and deliver them to health care providers. 

The joint RFI is the latest effort by the FTC and HHS to promote competition in pharmaceutical markets to ensure that every consumer has access to high-quality, affordable care. As announced in December 2023, the FTC, HHS and the Department of Justice are partnering on new initiatives which will include a forthcoming joint RFI to seek input on how private-equity and other corporations’ control of health care is impacting Americans.

The joint FTC and HHS RFI released today is requesting public input via comments, documents, and data regarding several topics with respect to generic drug markets and the potential causes of generic drug shortages, including:

• Whether and to what extent manufacturers, GPOs, and drug wholesalers are complying with their legal obligations under Section 3 of the Clayton Act and the Robinson-Patman Act.
• Whether and to what extent do the available protections for GPOs under the Federal Anti-Kickback Statute affect market concentration and contracting practices by GPOs, as well as drug shortages.
• Whether and to what extent market concentration among GPOs and drug wholesalers has impacted smaller health care providers and rural hospitals.
• Whether and to what extent concentration among GPOs and drug wholesalers has disincentivized suppliers from competing in generic drug markets.
• The impact of the prevailing GPO compensation model, which may rely on rebates, chargebacks, and administrative fees from manufacturers and suppliers in exchange for favorable treatment, on generic manufacturers and other suppliers.

The public will have 60 days to submit comments at Regulations.gov. Once submitted, comments will be posted to Regulations.gov.