Unexpectedly Intriguing!
01 June 2011

The news from America's hospitals, as recorded by the Associated Press (AP), sounds dire:

A growing shortage of medications for a host of illnesses — from cancer to cystic fibrosis to cardiac arrest — has hospitals scrambling for substitutes to avoid patient harm, and sometimes even delaying treatment.

"It's just a matter of time now before we call for a drug that we need to save a patient's life and we find out there isn't any," says Dr. Eric Lavonas of the American College of Emergency Physicians.

The problem of scarce supplies or even completely unavailable medications isn't a new one but it's getting markedly worse. The number listed in short supply has tripled over the past five years, to a record 211 medications last year. While some of those have been resolved, another 89 drug shortages have occurred in the first three months of this year, according to the University of Utah's Drug Information Service. It tracks shortages for the American Society of Health-System Pharmacists.

Let's do some math, shall we? If the number of medications in short supply has tripled over the past five years to 211 last year (2010), then that means that there were approximately 70 medications that were counted as being in shortage in 2005.

So something happened after 2005 that caused the number of shortages of various medications to steadily increase incrementally in each year afterward. We say "incrementally" because the shortages of medications would have been big news several years ago if it had happened more suddenly.

Perhaps we can deduce what might be behind the increasing number of drug shortages by discovering where in America the drugs are becoming increasingly in short supply:

The vast majority involve injectable medications used mostly by medical centers — in emergency rooms, ICUs and cancer wards. Particular shortages can last for weeks or for many months, and there aren't always good alternatives.

As we've seen before, the people who are most likely to use emergency rooms, and we suspect intensive care units (ICUs) and cancer wards, are people who already have health insurance coverage.

So who in America is both the most likely to have health insurance and be spending a lot of time in emergency rooms, ICUs and cancer wards? Gallup reports the results of its June 2009 survey on the topic:

Those aged 65 and older, and thus eligible for Medicare, are among the least likely to be uninsured, at 3.6%.

In addition to being the most likely to be covered by health insurance, elderly Americans are also the most likely to be spending extended periods of time in U.S. hospitals, which means that as a group, they are more likely to be the ones consuming more of the medications that are increasingly in short supply at U.S. medical facilities.

That's not just an American phenomenon. The same pattern is seen internationally as well, as the world's elderly are the most likely to consume hospital resources, like injectable medications.

Which we have to point out because the problem of medication shortages would appear to be a worldwide one, at least, according to AP:

Nor is it just a U.S. problem, as other countries report some of the same supply disruptions.

But here's the thing. The tripling of shortages of medications in the U.S. and the appearance of shortages of medications elsewhere in the world, which has only "some" of the same problem, has occurred since 2005. With the extent of the shortages being so pronounced in the United States, we should then first look for some kind of change that took place between 2005 and 2006 in the U.S. that might account for the situation.

And since the most likely route by which a shortage might develop would be for a sudden acceleration of the demand for these medications to outstrip the available supplies, at least in the absence of a widespread national disaster, we should look for a change that would cause an increase in demand for medications from America's emergency rooms, ICUs and cancer wards by America's primary consumers of these resources: the elderly.

Lo and behold, we find such a change! The Kaiser Family Foundation provides a timeline for recent changes in Medicare coverage, and specifically identifies a major change that took effect on 1 January 2006:

  • Part D coverage begins for all beneficiaries enrolled in a plan.
  • Dual eligibles' auto-enrollment takes effect.
  • Low-income subsidies for Part D coverage begin.
  • Medigap insurers prohibited from selling new policies with drug coverage.

Part D coverage of course refers to Medicare's drug benefit, which covers much of the cost of medications for Medicare beneficiaries, and which was not covered by Medicare insurance before 2006. We've highlighted "low income subsidies" in the list of changes that took effect on 1 January 2006 because these subsidies, by lowering the cost of medications to Medicare beneficiaries, would drive up the demand for them by making them suddenly more affordable to millions of Americans, who responded by consuming more of the available supplies.

But the article insists it's a "world problem". Now consider the response the U.S. has taken to attempt to remedy the situation apparently created within its own borders:

The FDA has taken an unusual step, asking some foreign companies to temporarily ship to the U.S. their own versions of some scarce drugs that aren't normally sold here.

Given the circumstances, where there would be some urgency to address a severe shortage in the U.S., it could well be that the shortages observed elsewhere in the world are a direct result of the re-direction of medications to the U.S. as part of the FDA's efforts to help reduce the shortages in the U.S.

There's one last factor to consider: couldn't this all be the result of an aging population?

U.S. Population Age Pyramid, 2005-2010, Animated - Source: Wolfram Alpha

An aging population in many nations of the world would indeed increase the demand for many medications, which is also the situation for the U.S. thanks to the aging of the very large Baby Boom generation. Between 2005 and 2010, the number of Americans Age 65+ increased by 3.67 million.

All of whom are eligible for Medicare Part D coverage. Which helps to explain why the problem of medication shortages has grown incrementally in each year since, rather than just seeing a one-time spike in shortages with the introduction of the government-subsidized prescription drug benefit program.

We therefore find that Medicare subsidies, combined with an increasing elderly population in the U.S., are the most likely cause of the severe shortages of medications that have developed at U.S. medical institutions since 2006 and, to a lesser extent, the world.

Just like how the increases in U.S. ethanol subsidies in recent years have caused shortages of corn!


About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations

Thanks in advance!

Recent Posts

Indices, Futures, and Bonds

Closing values for previous trading day.

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified