Generic Drug Shortages: When Too Much Competition Hurts Supply

Every year, millions of Americans fill prescriptions for generic drugs - cheap, effective, and reliable. Or at least, they used to be. Today, you might walk into a pharmacy for a life-saving antibiotic, a blood pressure pill, or an epinephrine auto-injector - and find it out of stock. Not because no one makes it, but because too many companies stopped making it.

The Price of Too Much Competition

Generic drugs were supposed to be the solution to high drug prices. When a brand-name drug loses its patent, dozens of companies jump in to make copies. Prices drop fast. In the early days of generic competition, a drug that cost $100 might fall to $5, then $2, then 50 cents. That’s great for patients and insurers. But here’s the catch: when prices fall below the cost of making the drug, manufacturers quit.

The U.S. Department of Health and Human Services says 9 out of 10 prescriptions today are for generics. That’s a win - until you realize that for some of those drugs, only one or two factories in the entire world can make them. And if one of them shuts down for a compliance issue, a power outage, or just because it’s no longer profitable, the supply vanishes.

Take the case of generic epinephrine. In 2023, a major manufacturer had to shut down its sterile injectable line after an FDA warning letter. Suddenly, hospitals couldn’t get the auto-injectors needed for allergic emergencies. The remaining suppliers couldn’t ramp up fast enough. Patients were forced to use expired devices or pay hundreds of dollars for the brand-name version.

This isn’t rare. In 2023 alone, the FDA recorded over 200 drug shortages, nearly half of them for generic injectables. And the pattern is always the same: low price → thin margins → manufacturer exits → shortage.

Who Makes These Drugs - and Why It Matters

Most people think of generic drugs as being made in the U.S. But the truth is, more than 80% of the active ingredients and 40% of finished generic drugs sold in the U.S. come from overseas - mostly India and China. These countries have the infrastructure to produce drugs at scale, but they’re also under intense pressure to cut costs.

The top five generic manufacturers - Teva, Sandoz, Mylan (now Viatris), Aurobindo, and Sun Pharma - control nearly half of the global market. But even among them, competition is uneven. For common pills like metformin or lisinopril, you might find 15 different brands on the shelf. For sterile injectables like heparin or dopamine? Often just one or two.

Why? Because making a pill is easy. Making a sterile injection isn’t. It requires clean rooms, advanced equipment, and months of testing just to get FDA approval. Building a facility costs between $200 million and $500 million. Few companies can afford that unless they’re sure they’ll sell enough to cover it. And with prices so low, many just don’t.

The FDA approved 956 generic drug applications in 2023. But that doesn’t mean 956 new drugs hit the market. Many of those were for drugs already made by other companies - meaning more players chasing the same tiny profit margin. The result? No one wins.

The Shortage Spiral

Here’s how a shortage starts:

• A drug goes generic. Ten companies enter the market.
• Prices drop 90% in two years.
• Three companies can’t cover their costs. They exit.
• Seven remain - but now they’re making more to fill the gap.
• One of those seven has a quality issue. The FDA shuts them down.
• Suddenly, only three companies are left.
• They can’t produce enough. Shortage.

This cycle repeated itself with generic doxycycline, insulin, and even simple antibiotics like amoxicillin. In 2022, a shortage of the antibiotic ceftriaxone forced hospitals to ration doses. Children with ear infections waited weeks for treatment. Doctors used older, less effective drugs - or worse, sent patients home with no treatment at all.

The American Medical Association found that 78% of doctors experienced at least one generic drug shortage in 2023. For hospital pharmacists, it’s worse: 42% say these shortages are happening often enough to hurt patient care.

Who Pays the Price?

You might think, “If the drug is cheap, who cares if there’s a shortage?” But here’s the reality:

• When a generic runs out, patients get the brand-name version - which can cost 10 to 100 times more.
• Insurers may refuse to cover the brand, forcing patients to pay out of pocket.
• Some patients skip doses or split pills to make it last - dangerous with medications like blood thinners or seizure drugs.
• Emergency rooms see more patients with preventable complications because they couldn’t get their daily meds.

AARP reports that in 2023, nearly 1 in 5 seniors had to choose between paying for their medications or buying food because of sudden generic shortages. The savings from generics disappeared overnight.

Meanwhile, the companies that stayed in the game are barely surviving. One small generic manufacturer told a Senate committee in 2024: “We make $0.03 per tablet of a critical heart medication. We sell 10 million a month. That’s $300,000 in revenue. Our operating costs? $320,000.” They’re losing money - but they keep making it because they can’t let patients down.

The Fix Isn’t More Competition - It’s Smarter Competition

The European Medicines Agency says the sweet spot for essential medicines is 4 to 6 manufacturers. That’s enough to keep prices low, but enough to ensure backup if one company fails.

Right now, only 65% of essential generic drugs meet that standard. The rest? One or two suppliers. That’s not competition - that’s a single point of failure.

Solutions are possible, but they require policy changes:

• Strategic stockpiles: The government should maintain emergency reserves of critical generics - like epinephrine, insulin, and antibiotics - just like it does for vaccines.
• Price floors: For essential drugs with only one or two suppliers, set a minimum price that covers production costs. Not to raise prices - to prevent collapse.
• Manufacturing incentives: Tax credits or grants for companies that build U.S.-based sterile injectable facilities. Right now, it’s cheaper to outsource - even if it’s riskier.
• Fast-track approvals: If a company has a proven track record of quality, let them enter the market faster for high-risk generics.

The Inflation Reduction Act’s drug price negotiation rules, starting in 2026, will make this worse - unless we act now. The government will negotiate lower prices for 10 drugs in 2026, and 15 more each year after. But if those drugs are already made by one or two factories, lowering the price further could force them out of business.

What You Can Do

You can’t fix the system overnight. But you can protect yourself:

• Ask your pharmacist if your generic drug has had recent shortages. If it has, ask about alternatives.
• Keep a 30-day supply of critical medications on hand - especially if you’re on a drug with a history of shortages.
• Sign up for FDA drug shortage alerts. They’re free and updated weekly.
• If your drug is unavailable, talk to your doctor about switching to a different generic brand - not necessarily the brand-name version.

The system is broken, but it’s not hopeless. We built a system that prioritized low prices over resilience. Now we need to fix it - not by reducing competition, but by making sure the right kinds of drugs have enough makers to survive.