Thank you for inviting HealthPRO Procurement Services to present at today's meeting. My name is Kathy Boyle, vice-president of pharmacy services at HealthPRO. I would like to introduce my colleague, Michael Blanchard, clinical director at HealthPRO.
HealthPRO is Canada's national group purchasing organization for health care, representing the purchasing interests of hospitals, provincial health authorities, and shared services organizations from coast to coast. We recognize the critical impact that drug shortages can have on delivering quality patient care. We are doing everything possible to help our members find alternative solutions to drugs that are in short supply, and we are actively collaborating with industry stakeholders to find solutions. To that end, we are pleased to be invited to participate in today's important event.
Although the problem is not new, the number of drug shortages has significantly increased in the last few years. This is a complex problem, with no easy solutions. It is important to first understand the following key factors that contribute to the global problem. It is also important to consider that every situation is different, and that each product on back order and each shortage is driven by unique contributing factors.
The global supply chain is complex. A trend by manufacturers to outsource active pharmaceutical ingredients and raw materials has created intricate and increasingly less stable global supply chains. Manufacturers are susceptible to shortages or delays at any of their global facilities.
The move to consolidate production overseas warrants consideration. The health care sector's ability to respond to Canadian shortages is further hampered by suppliers' attempts to consolidate production overseas, generally in one plant, which increases vulnerability to production interruptions.
There is increased demand without increased production. As the need for medications grows, manufacturers are struggling to keep up with demand. Contributing factors can include rigid regulatory control over manufacturers' active pharmaceutical ingredients, raw material shortages, and delays caused by line production increases of drugs in greatest demand.
We now have stricter drug regulations and improved quality. In response to several tainted drug and food incidents over the past several years and the increasing challenge of counterfeit drug production, the U.S. Food and Drug Administration has increased the frequency and intensity of audits with a focus on complete traceability of all compounds. In several cases, strict FDA audits have impeded production of high-demand drugs at manufacturing facilities, contributing to temporary shortages.
Public policy directives on health care costs have affected drug supplies. The drive to control health care costs in Canada has led to a leaner supply chain and tighter hospital, distributor, and manufacturer inventory across the country. Shrinking margins for manufacturers and distributors affects inventory and product availability. Shrinking margins can also negatively reshape the market, leading manufacturers to focus on the most profitable products.
Canada's market share is limited. Canada represents 3% of the global drug market. Of that 3%, Canadian hospitals represent just 10%, a small business market opportunity for global manufacturers.
There is no stakeholder in the Canadian supply chain that has not contributed to, or been complicit in, the problem of drug shortages, including global parent companies, local manufacturers and distributors, Health Canada, provincial authorities, group purchasing associations, and hospitals. Nevertheless, there is room for each of these key stakeholders to consider how they might contribute to a solution.
We have the following suggestions related to each of the stakeholders.
Health Canada may consider guarding against standards of other countries overriding the high-quality standards in Canada, ensuring there are multiple suppliers of medically necessary drugs in Canada, mandating early warnings of anticipated supply disruptions, mandating early warnings of manufacturers' plans to exit the market, regulating the exit of the market for medically necessary drugs, easing the process for access of secondary suppliers of single-source critical drugs not already in Canada, and overseeing the establishment and sustained funding of a national drug shortage reporting system.
Global drug manufacturers must shoulder greater moral accountability for health care in Canada. A licence to make profits on Canadian health care should go hand in hand with a commitment to patient care in the form of a stable supply. We must ensure that any required remediation plans do not negatively affect to a significant degree the production of supply available in Canada.
Manufacturers and distributors must be more transparent with respect to potential supply disruptions and take responsibility for ensuring there is fair share distribution in place to prevent product hoarding, and have appropriate technology in place to handle an allotment approach effectively.
Provincial authorities should establish and monitor a fair share mandate and ensure that hospitals do not stockpile supplies of drugs and continue sharing information regarding clinical alternatives with their fellow provinces.
Group purchasing organizations must take a national perspective that ensures that everyone is not relying on a single supplier, create multi-award contracts that improve the security of supply for medically necessary products, and try to create a more attractive business environment to encourage multiple suppliers in Canada to stay in Canada and to encourage new suppliers to enter Canada.
HealthPRO noted the increasing instances of shortages and supply disruptions and a year ago proactively began working on a revised contracting strategy to better protect HealthPRO's pharmacy members. Our revitalized strategy was developed with direct input from suppliers and HealthPRO members, and it addresses many of the concerns being discussed here today.
The new contracting strategy strives to strike the right balance between competition, purchasing power, and a more reliable supply chain, while ensuring full compliance with regulatory requirements and contracting guidelines. It aims to fortify relationships with suppliers to better manage emerging shortages.
As part of the new strategy, HealthPRO has set more specific guidelines, and HealthPRO suppliers will now be contractually accountable for providing notification about critical inventory levels for hospital-specific items, notifications and action plans for anticipated drug shortages, correction plans for drug shortages lasting more than 60 days for hospital-specific items, and notification regarding an intention to discontinue drugs.
In addition, HealthPRO fully supports the establishment of a national drug reporting system. We have been providing just that service to our members for the last 10 years. Now more than ever it is imperative that we work together to improve transparency and communications surrounding drug shortages. We, as Canada's health care GPO, must adjust our procurement strategies to encourage additional and stable sources of supply. Security of supply is as important as safety, efficacy, and value to the health care of Canadians. We at HealthPRO are committed to making this happen.
Thank you.