Last Thursday, FDA issued an interim final rule requiring manufacturers that are the only producer of certain drug products to report all manufacturing interruptions to the agency. Early notification will help FDA work with drug manufacturers and doctors to make sure that patients have access to life-supporting products. The interim rule was spurred by President Obama’s Oct. 31, 2011, executive order, which directed FDA to reduce and prevent drug shortages.

But the agency is not relying on just one tactic. In addition to the interim final rule, FDA is developing a tracking database to monitor drug shortages. The database will record the numbers of shortages, the reasons for shortages, and what steps FDA is taking to address and prevent them. The database is a high priority for the agency, which hopes to complete it in 2012.

Also, several observers have expressed concern that unscrupulous organizations could attempt to reap large profits from drug shortages. In response, FDA has begun analyzing reports about drug stockpiling and exorbitant pricing. The agency plans to provide the Department of Justice with information about these reported activities, and the Department will determine whether they are consistent with the law. This issue is on Congress’s radar, too: Senator Charles E. Schumer (D-NY) recently introduced a bill to make price gouging on scarce drugs a federal crime.

As any supply-chain professional knows, having one source of a crucial item is far from an ideal situation. If a drug is crucial but not profitable, we may not see new sources spring up to provide additional supply-chain security. But FDA’s initiatives promise to ease the threat of drug shortages and reduce patients’ suffering.

The Senate’s Foreign Earnings Reinvestment Act, like a related bill in the House of Representatives, would reduce tax rates for CROs and biopharmaceutical firms that repatriated money earned overseas. With the money they saved, companies could hire staff and invest in research, ACRO argues.

WinAmerica, an interest group supported by various firms, says that the bill would repeat the success of a 2004 repatriation tax break. Citing information from the Bureau of Labor Statistics, the group observes that average annual private-sector employment increased by 4,385,000 jobs from 2000 through 2007, and that 98% of the increase occurred during the years when the tax break was in effect (2004 through 2006).

The tax break did not benefit the entire private sector, however. It primarily helped pharmaceutical and technology companies, according to a report by Senator Carl Levin (D-MI). Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson, Merck, and Pfizer were among the top 15 repatriators that time around. After bringing $155 billion in overseas earnings back into the country, these 15 firms reduced their overall US workforce by about 21,000 jobs and spent slightly less on R&D. Instead of creating jobs, the companies used the extra money to repurchase stock and raise their top executives’ pay by about 28%—despite express prohibitions against using the money for these purposes.

The increase in employment that WinAmerica cites seems to have occurred in industries other than those that benefited from the tax break—and for other reasons. The law that granted the previous tax break did not include a means of monitoring compliance. Unless the Foreign Earnings Reinvestment Act can do this, and can impose penalties for noncompliance, it will not create jobs for those who need them. I hope Congress takes heed of Senator Levin’s report as it considers the new bills.

It’s crunch time on Capitol Hill. Before Congress will consider raising the debt ceiling by next week’s deadline, they have insisted on achieving a budget deal that will reduce the federal debt over the long term. Tensions have mounted as President Obama and leading lawmakers have taken turns grandstanding and negotiating. Both parties agree that spending cuts should be part of the budget deal, and some Democrats have expressed willingness to find opportunities for savings in Medicare and Medicaid. But these programs might now be spending less money if one bill on the Senate’s calendar had passed when it was originally introduced.

The bill is the “Preserve Access to Affordable Generics Act,” which would prohibit pharmaceutical companies from paying makers of generic drugs to delay the introduction of their products. The bill describes pay-for-delay settlements as anticompetitive agreements that harm consumers, echoing the words of the Federal Trade Commission (FTC) and 32 state attorneys general. By banning pay-for-delay deals, the act could save consumers, including taxpayers, $3.5 billion per year, said FTC Chairman Jon Leibowitz in a press release.

In 2005, several court decisions permitted these agreements, which postpone the market entry of generic drugs by an average of 17 months longer than settlements that do not include a payment, according to FTC. In response to these decisions, Senator Herb Kohl (D-WI) introduced the act in February 2009.

The Generic Pharmaceutical Association (GPhA) has been a consistent critic of the act ever since. Last week, GPhA said in a press release that pay-for-delay settlements were good for consumers. The group also implied that prohibiting these agreements would hinder the use of safe and affordable medications. But if pay-for-delay deals postpone the market introduction of generic drugs longer than other settlements do, this assertion seems hard justify.

At a time when financial constraints are affecting consumers and the federal government alike, I think Senator Kohl’s bill deserves serious consideration. It is designed to ensure that cost-saving generic drugs are available sooner rather than later, and it would allow companies to present evidence that their agreements are not anticompetitive. In my view, the “Preserve Access to Affordable Generics Act” would ease consumers’ economic concerns without inflicting damage on the pharmaceutical industry.

They’re likely to pursue acquisitions, thus continuing the trend of the past few years. The burgeoning biopharmaceutical industry shows potential for yet more growth, making those companies tempting targets for small-molecule manufacturers. In public, pharmaceutical executives describe modest acquisition goals, sometimes mentioning price tags of $5 billion or less.

But David Snow, chief executive of Medco Health Solutions, doesn’t take these statements at face value. Any biotechnology manufacturer—even heavyweights like Biogen Idec and Amgen—could be a takeover target, he told the Reuters Health Summit. “You have to become awfully large to be unaffordable—there’s lots of cash, lots of capital out there for acquisitions,” he said, according to Reuters. Drugmakers who are still flush might see biopharmaceutical acquisitions as a safe path through rough seas.

Not so fast. Regulatory approval for these mergers might soon become tougher to obtain. Late last week, Senator Herb Kohl (D-WI) asked the Federal Trade Commission to examine pharmaceutical-industry mergers with care, lest they exacerbate the problem of drug shortages. “[F]ewer drug companies competing in a therapeutic class may lead to fewer prescription drugs being developed and sold within that class,” said Kohl, citing a study by the Government Accountability Office.

He also quoted a Washington Post article on the same topic. A smaller pool of drugmakers means “that when raw material runs short, equipment breaks down, or government regulators crack down, the snags can quickly spiral into shortages,” said the article. Patients would certainly be in trouble if mergers slowed innovation and made drugs harder to get.

So how will drugmakers stay afloat during these turbulent times? They might well need the cunning of Odysseus.

To avoid liability, Hospira decided to stop manufacturing sodium thiopental, an anesthetic used to administer lethal injections. The company planned to manufacture the drug at its site in Italy until that country’s authorities chose to forbid its export, fearing that it would be used for capital punishment. Hospira was the lone US manufacturer of sodium thiopental.

“Hospira manufactures this product because it improves or saves lives, and the company markets it solely for use as indicated on the product labeling,” said company spokesperson Dan Rosenberg in September 2010, referring to sodium thiopental. “The drug is not indicated for capital punishment, and Hospira does not support its use in this procedure.”

Hospira’s decision worsens the shortage of the drug, and foreign supplies are dwindling. Countries such as Germany and the United Kingdom are refusing to export it to the US.

Oklahoma uses pentobarbital, another anesthetic, in place of sodium thiopental. The state administers the anesthetic as part of the traditional three-drug lethal injection procedure. But critics say that pentobarbital’s effectiveness in preventing pain is unproven.

Ohio plans to administer pentobarbital alone to execute inmates, and defense attorney David Stebbins is concerned about this plan. “We just don’t have any information on that, and I’m not sure anybody does since it’s never been used that way,” he told the Associated Press.

So here we have a state administering a substitute drug in a use for which it is not indicated, seemingly without FDA oversight. If the agency’s mandate is to ensure the safety, efficacy, and security of human drugs, should it be regulating the drugs used for lethal injections? On the other hand, why should we be concerned with the health, safety, or comfort of someone whom we have deemed unworthy of life?

The search for new suppliers of, and alternatives to, sodium thiopental emphasizes the inherent contradictions of capital punishment. The events also reveal an oddity in the way that we regulate drugs.

In May 2010, a jury found that Novartis Pharmaceuticals had discriminated against its female employees by paying them less money than their male counterparts and giving them fewer chances for promotions. If Judge McMahon approves the agreement this week, Novartis’s US unit will pay the women, who are all current and former female employees, about $152.5 million. On top of that, Novartis will make several improvements, including revising its sexual-harassment policies and training and hiring an external specialist to identify and remedy gender disparities at the company. The total value of the settlement is about $175 million.

Unfortunately, women in the pharmaceutical industry suffered a setback just two days before Judge McMahon’s statement. On Wednesday, the US Senate failed to bring the Paycheck Fairness Act to the floor for a vote, effectively ending its chances for passage in the current Congress. The bill would have closed loopholes in the Equal Pay Act of 1963 and sweetened incentives to prevent pay discrimination against women. The bill also would have required employers to demonstrate that wage gaps resulted from factors other than gender and to train women in salary negotiations.

Republicans were unanimous in their opposition to debating the bill. They and the US Chamber of Commerce have publicly opposed the Act out of concerns that it would lead to a rise in employee lawsuits, which would be costly for employers to fight. But if companies complied with the law by paying men and women equally, I think that they would face fewer employee lawsuits. And although defending itself against a lawsuit might be a burden for a pharmaceutical company, I think it is a much greater burden for aggrieved women to wage the suit in the first place.

The Novartis decision and settlement puts the pharmaceutical industry on notice that it can be held accountable for gender discrimination. Although the settlement is good news for women, it is also unusual because not all plaintiffs in gender-discrimination lawsuits are fortunate enough to receive full compensation in the end, as Judge McMahon noted. Let’s pause to celebrate the step toward gender equality that the settlement represents. But let’s also hope that the Paycheck Fairness Act receives due consideration in the next Congress.

In 2005, Congress granted companies a big tax break that they hoped would create American jobs. The pharmaceutical industry took advantage of the opportunity to bring $100 billion in foreign profits back into the country. But instead of using the money to increase its workforce, the industry began cutting jobs. That year, drugmakers began laying off tens of thousands of American workers, according to a 2007 New York Times article. This would be a bad year for that history to repeat itself, given how many people already have lost jobs in the past year or so because of the poor economy. Still more layoffs are to come, as evidenced by Bristol-Myers Squibb’s (New York) announced plan to cut 3% of its workforce.

Some public officials want drugmakers to pay more in taxes, not less. Montana’s Governor Brian Schweitzer claims that the industry avoids paying its fair share by using complex tax-sheltering plans to shift income earned in the US to overseas locations. For example, Merck & Co. (Whitehouse Station, NJ) transferred patents to a subsidiary in Bermuda, then paid that subsidiary tax-deductible royalties for those patents. In February 2007, Merck finally had to pay a $2.3-billion settlement to the Internal Revenue Service for this practice, according to the Los Angeles Times.

I’m not inclined to agree with drugmakers that the R&D tax credit should be made permanent. History has shown that the change would not necessarily create jobs, and I don’t think the favor is justified in light of many companies’ tax-ducking schemes. Making the R&D tax credit permanent would not be the right solution for the industry, the government, or patients. Let’s try to think of other ways to create jobs and spur innovation.

Jon Leibowitz, chairman of the Federal Trade Commission (FTC), testified to a US House of Representatives subcommittee last Tuesday that pay-for-delay settlements were on the rise. During the first nine months of fiscal 2010, companies entered into 21 suspect patent-litigation settlements—more than the total for the entire previous fiscal year. Every FTC commissioner since the Clinton administration has opposed these settlements, and ending them is one of FTC’s top priorities, Leibowitz said.

Some lawmakers seem to be siding with Leibowitz, too. Two days after his testimony, the US Senate Appropriations Committee voted to pass the Preserve Access to Affordable Generic Drugs Act, which would restrict pay-for-delay settlements. The act would presume such settlements to be illegal and anticompetitive unless companies proved to FTC that they did not restrict competition. Previous attempts to pass similar bills have failed, however, and it remains to be seen whether a ban on pay-for-delay settlements will become law.

But at least one drugmaker is attempting to break its dependence on patents, thus softening the blow of generic competition. Chris Viehbacher, CEO of sanofi-aventis (Paris) told the Associated Press last week that his company will move away from blockbuster drugs and instead focus on smaller patient groups, emerging markets, consumer-health products, and even generic drugs. Viehbacher’s strategy reflects the industry’s increasing interest in niche products, orphan drugs, and the developing world.

If sanofi-aventis can remain profitable with its new focus, it could point the way forward for the rest of the industry. In the absence of strong pipelines, Viehbacher’s ideas could help keep pharmaceutical companies healthy without unduly reducing patients’ options by stifling competition from generic drugs. For the sake of consumers and the drug industry as a whole, let’s wish him success.

There is not a simple answer to that question as both the innovator-drug industry and the generic-drug industry are taking decidedly different positions. So far, the innovator-drug industry as a whole is offering a measured view of the Senate proposal. On Nov. 19, the Pharmaceutical Research and Manufacturers of America (PhRMA) Senior Vice-President Ken Johnson released a statement in the wake of the Senate’s decision to proceed with debate. “While we are still reviewing the Senate bill, we remain committed to do our part to make comprehensive healthcare reform a reality this year,” he said in the statement. “We believe that all Americans should have access to high-quality, affordable healthcare coverage and services. If done in a smart way, healthcare reform will benefit patients, the economy, and the future of America. Compared to the House bill, which would have a chilling effect on medical progress in America, the Senate approach provides a much better blueprint for reform.”

PhRMA has supported healthcare reform, offering an $80-billion commitment over 10 years to close gaps in Medicare prescription drug coverage. It, however, objected to measures in the recently passed House bill, which would impose mandatory rebates in Medicare Part D coverage. “PhRMA and its member companies share the goal of closing the Medicare Part D coverage gap for affected seniors and have agreed to provide a 50% discount on brand-name medicines purchased in the so-called ‘doughnut hole,’ said PhRMA in an Oct. 29, 2009 press release. “However, the Congressional Budget Office has warned that the House bill, which imposes mandatory rebates in Part D, would ultimately lead to a 20% increase in Part D premiums paid by beneficiaries.”

In offering a more supportive position toward the Senate provision, PhRMA says that it remains committed to working with parties to get a healthcare measure passed this year. “What’s critical now is that we remain focused on the important goal of helping pass a comprehensive health care reform bill that can get to the President’s desk this year. We will continue to be a constructive partner to help meet this goal,” said Johnson in the statement.

Meanwhile, the generic-drug industry is voicing disagreement with the Senate bill. Generic Pharmaceutical Association (GPhA) President and CEO Kathleen Jaeger sharply criticized the biologics provision of the Senate healthcare reform proposal. “Just when you think the pro-BIO and PhRMA provisions in healthcare reform couldn’t get any more favorable for them, the Senate healthcare reform bill has further disappointed consumers by adding additional monopoly protection to expensive biologic medicines,” she said in a Nov. 19 statement. “Regardless of the motivation, the biologic provision in this bill takes the already egregious and unwarranted 12 years of exclusivity and extends it. The Senate leadership had the opportunity to address the deficiencies of the House HCR [healthcare reform] bill and to fulfill the Senate HELP [Health, Education, Labor and Pension] Committee’s commitment to close down a major loophole known as ‘evergreening’ and deliver a more reasonable biogenerics pathway to consumers, labor, businesses, generic manufacturers, and employers. Instead, they have provided further hurdles to access more affordable medicines.”

No doubt both the innovator-drug and generic-drug industries will be participants among the many interests in the massive upcoming discourse on healthcare reform. To put it succinctly, let the debates begin.

At first blush, it looks like drugmakers took a beating. The New York Times said that the drug industry receives “harsh treatment” in the bill. In June 2009, President Obama and the Pharmaceutical Research and Manufacturers of America (PhRMA) agreed that the industry would provide $80 billion in rebates and discounts on branded pharmaceuticals over 10 years. The House bill would require drugmakers to provide another $60 billion in rebates over the same period, making a total of $140 billion in concessions.

These rebates might have been what Ken Johnson, PhRMA’s senior vice-president, had in mind when he said in a press release that the House bill would kill tens of thousands of jobs in the pharmaceutical industry. Yet the additional rebates might not be included in the healthcare-reform bill that the Senate eventually passes.

The House bill also would enable the government to negotiate the prices that Medicare pays for drugs, a policy that the industry has so far opposed. On the other hand, the bill would not allow Medicare to create a formulary. This omission essentially vitiates Medicare’s price-negotiating power, said Steven D. Findlay, senior health-policy analyst of Consumers Union, in the New York Times article.

Ultimately, I think it’s too soon to draw conclusions about what healthcare-reform legislation will mean for the pharmaceutical industry. The Senate has yet to pass its own version of the bill. The Senate bill might not, for example, require the additional rebates from the industry that the House bill does. It might, as the House bill does, give biologics protection from generic competition for 12 years. And after the Senate passes its bill, it will have to be reconciled with the House bill.

Despite its initial alarm, PhRMA seems determined to withhold its judgment. “This is a three-act play, and a good critic doesn’t write a review after the opening scenes,” said Johnson in the press release. Time will tell what shape the final legislation takes. It is at least conceivable that the industry could gain from healthcare reform. The law that Obama finally signs could expand the industry’s market, increase drug sales, and provide incentives for innovation.