Government Has Proper Role in Ensuring Manufacture of Needed Drugs

President Obama has signed an executive order intended to promote sufficient supplies of neccessary, but unprofitable, medications—such as some chemotherapy drugs.  That’s good.  But from what I could read, the order does not get to the bottom-line cause of the problem. From the ABC story:

Limited manufacturing, lagging production time, and lack of profits from these drugs contribute to the shortages. The production costs for some drugs can outweigh the money that companies can make from them, since many drugs now have cheaper generic alternatives. So manufacturers stop making the drugs…But while the FDA can oversee imports of drugs that are in short supply, it cannot regulate how much a company can make. In fact, manufacturers are not required to report shortages to the FDA. The amount of a drug made available within a hospital is set by an agreement between the hospital and the manufacturer.

This is an unintended negative consequence of the good policy of permitting generics to come to market quickly as a method of keeping the price of medications down generally.

So, how do we best remedy the problem of a drug that costs the manufacturer more money to produce than it can obtain in sales?  Perhaps, the industry could set up a non profit conortium to manufacture such necessary medications.  Or, perhaps such drugs could be identified and treated by the government like the flu vaccine. Or, perhaps the government could order the drugs directly and distribute, although once you go that route bureaucratic messes are sure to follow, so it would be my last resort option. Or, perhaps companies that continue to produce approved lists of unprofitable drugs could be offered tax incentives.

Whatever, it is not a problem that the POTUS can handle on his own.  Congress needs to hold hearings and act.