Policy considerations
1. There are short-term and long-term remedies. Short-term remedies include improvements in the data, planning and forecasting infrastructure. This will require additional investments. Supply chain disruptions can reflect market structure problems. Long-term policies address the market structure and the international division of labour.
2. Existing supply networks arise from market processes that reflect a competitive combination of qualities and prices. Deviating from market results comes at a cost which can be interpreted as an insurance premium that health agencies need to incur to avoid impacts on patients. Additional costs require appropriate financing. Ideally, a well-designed market should internalise the risk of disruption, e.g., through appropriate contracts with the adequate incentive structures.
3. Antibiotics shortages need to be considered against the backdrop of the global risk of antimicrobial resistance. Ideally, policy remedies should address both issues.
2. Existing supply networks arise from market processes that reflect a competitive combination of qualities and prices. Deviating from market results comes at a cost which can be interpreted as an insurance premium that health agencies need to incur to avoid impacts on patients. Additional costs require appropriate financing. Ideally, a well-designed market should internalise the risk of disruption, e.g., through appropriate contracts with the adequate incentive structures.
3. Antibiotics shortages need to be considered against the backdrop of the global risk of antimicrobial resistance. Ideally, policy remedies should address both issues.
Remedies
1. Understand the scope of the problem. Data availability is an issue. Efforts need to be undertaken to not only track and forecast drug shortages, but to focus on shortages of non-substitutable drugs.
2. Demand forecasting and stable supplier relationships. Health authorities need to better understand the demand developments for antibiotics in the population. Evidence-driven demand planning could form the basis for building stable supply relationships, e.g., through multiyear contracts with producers that contain robust provisions in case of non-delivery.
3. Capacity markets and excess inventory. In case of emergencies, add-on production capacities that timely provide the drugs in question may address arising shortages from the outset.
4. Single Market. The European Union provides a powerful tool to mitigate supply risks across multiple players through the Single Market. Coordinated and more centralised EU inventories can also help to reduce overall safety stock and thereby avoid inefficiencies.
5. Bargaining power. Countries, regions, or health agencies might consider deeper cooperation and pursue joint forecasting and joint procurement strategies. Adverse effects on the market structure of suppliers and possibly anti-competitive behaviour of suppliers need to be monitored.
6. Diversification of supply. Diversification requires internationally competitive producers. Hence, the debate about broadening the supplier base is embedded in a wider discussion about competitiveness and structural change.
7. Subsidised procurement prices. Reimbursement models that delink development costs from unit sales have been proposed to tackle drug shortages.
2. Demand forecasting and stable supplier relationships. Health authorities need to better understand the demand developments for antibiotics in the population. Evidence-driven demand planning could form the basis for building stable supply relationships, e.g., through multiyear contracts with producers that contain robust provisions in case of non-delivery.
3. Capacity markets and excess inventory. In case of emergencies, add-on production capacities that timely provide the drugs in question may address arising shortages from the outset.
4. Single Market. The European Union provides a powerful tool to mitigate supply risks across multiple players through the Single Market. Coordinated and more centralised EU inventories can also help to reduce overall safety stock and thereby avoid inefficiencies.
5. Bargaining power. Countries, regions, or health agencies might consider deeper cooperation and pursue joint forecasting and joint procurement strategies. Adverse effects on the market structure of suppliers and possibly anti-competitive behaviour of suppliers need to be monitored.
6. Diversification of supply. Diversification requires internationally competitive producers. Hence, the debate about broadening the supplier base is embedded in a wider discussion about competitiveness and structural change.
7. Subsidised procurement prices. Reimbursement models that delink development costs from unit sales have been proposed to tackle drug shortages.
