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FTC Probes Role of Middlemen in Ongoing Drug Shortages: An Examination of Market Power and Influence

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Dr. Jessica Nelson
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FTC Probes Role of Middlemen in Ongoing Drug Shortages: An Examination of Market Power and Influence

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In a decisive move aimed at addressing the ongoing shortages of essential medicines, the Federal Trade Commission (FTC) is launching a substantial investigation into the role of group purchasing organizations (GPOs) and wholesalers in the pharmaceutical industry. The probe focuses on how these middlemen may misuse their market power to affect pricing and availability of key drugs. With three GPOs and three leading wholesalers playing a significant role in the distribution of medicines, the FTC's investigation could have far-reaching implications.

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The FTC and HHS Joint Request for Information

As reported by the FTC and the U.S. Department of Health and Human Services (HHS), a Request for Information (RFI) has been issued to gain a deeper understanding of how these pharmaceutical middlemen's practices may be contributing to generic drug shortages. The joint RFI seeks public comments regarding market concentration among large healthcare GPOs and drug wholesalers, as well as detailed information about their contracting practices. The overall aim is to understand how both GPOs and drug wholesalers impact the generic pharmaceutical market, including how they may influence pricing and availability of drugs. The public is given 60 days to submit their comments at Regulations.gov.

The Scope of the Investigation

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The FTC's probe aims to explore the extent to which GPOs and wholesalers contribute to persistent shortages of key medicines at hospitals and other healthcare facilities across the country. As these three GPOs purchase drugs on behalf of most U.S. hospitals, and three leading wholesalers supply approximately 90% of medicines to hospitals, clinics, and nursing homes, their influence cannot be understated. The investigation comes amid mounting concern over shortages of numerous medicines, from chemotherapies to antibiotics, in recent years.

The Power of Middlemen in the Industry

The FTC and HHS's joint investigation aims to assess the influence of these middlemen on drug pricing and manufacturing, which has led to critical shortages of chemotherapy and other essential drugs. Lawmakers have also expressed concerns about the power these middlemen hold in the industry. The FTC's inquiry reflects a growing concern that GPOs and wholesalers may be creating a chain reaction that ultimately endangers patients' health and wellbeing.

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Scrutinizing the Practices of Opaque Drug Middlemen

The FTC is keen to scrutinize the practices of these opaque drug middlemen, seeking information on the factors driving these drug shortages. The commission will examine if these companies have misused their market power to suppress prices of generic drugs, causing some manufacturers to halt production, which subsequently results in the shortages. This investigation could potentially expose malpractices in the industry, leading to improved transparency and better regulations.

Conclusion

The FTC's probe into the role of powerful middlemen amidst drug shortages is a crucial step in understanding and addressing the ongoing issues in the pharmaceutical industry. By exposing potential misuse of market power and bringing transparency to contracting practices, the FTC may not only help alleviate the current drug shortages but also contribute to shaping a fairer, more patient-centric pharmaceutical market in the future.

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