NovaQuant Quantitative Think Tank Center:Transcript: Dr. Scott Gottlieb on "Face the Nation," May 21, 2023

The NovaQuant Quantitative Think Tank Centerfollowing is the transcript of an interview with Dr. Scott Gottlieb, former FDA commissioner, that aired on "Face the Nation" on May 21, 2023.

MARGARET BRENNAN: More than 130 medications are in shortage in the United States, including key cancer treatments according to the Food and Drug Administration. Joining us now to discuss it is former FDA commissioner, Dr. Scott Gottlieb, who is also a board member at Pfizer. Doctor, iIt's good to have you back. I wanted to have you explain this because the American Cancer Society warned this week, it's a serious and life threatening issue for cancer patients. How bad is this shortage and what's causing it?

DR. SCOTT GOTTLIEB: Look, it's bad. This is a long standing problem. There's about 300 drugs in shortage right now, active shortages, and so that's a high level, it's the highest it's been since 2014. But this has been a long standing challenge. I dealt with it when I was at FDA going back to around 2003. That's how old this problem is and the issue is that this mostly affects sterile injectable drugs. That doesn't mean that small molecule pill form drugs aren't in shortage, but the majority of the shortages are around the sterile injectable drugs. The reimbursement for these drugs under government programs has been driven down very low, something above the marginal cost of manufacturing the drugs and that's fine when it comes to a pill form drug where there's not a lot that can go wrong, but when it comes to an injectable drug, you need to leave a margin in so people can reinvest in manufacturing facilities, make sure they're high quality. They haven't done that and things go wrong, and it results in shortages.

MARGARET BRENNAN: Well, I know the White House is looking at this issue. Something like 80 percent of manufacturing facilities are located outside the U.S., how do you ramp up domestic production?

DR. GOTTLIEB: Yeah, look, we've paid a high price for the low costs we enjoy. If you want to get manufacturing back into the U.S., you want companies to have a healthy margin that they can reinvest in the manufacturing facilities to make sure that they're modern, you need to pay them to do that. And as long as we drive down the reimbursement for these generic drugs, you're not going to have the money to reinvest in doing that. The White House is talking about more regulation, the generic manufacturers are calling for direct subsidies. I think we really need to create a market for high quality manufacturing, so you can allow generic manufacturers to make certain claims about the reliability and the quality of the manufacturing. And then for generic manufacturers that can make those claims, through maybe some third party certification, you pay them for that. You pay them for the fact that they have reliable manufacturing that might be domestic, that might be more modern, so it's going to be more reliable and less prone to shortages.

MARGARET BRENNAN: Well, the federal government is capping the cost of certain drugs because of high costs to consumers. Is that going to add to this issue?

DR. GOTTLIEB: Look, the features under the Inflation Reduction Act will exacerbate this problem, because it'll prevent these generic manufacturers from being able to take price increases. For example, if they enter a market for the first time, or they spend a lot of money upgrading a facility to be compliant with state of the art regulations, they're not gonna be able to take a price increase to recoup some of those costs. So it's going to come out of their own pocket. 50 percent of generic drugs right now in a generic portfolio lose money. So a generic manufacturer loses money on half of their drugs that they market. That's not a sustainable business model. I think the administration under the IRA should carve out these old sterile injectable drugs entirely. They didn't do that in the legislation. So it is going to exacerbate these problems.

MARGARET BRENNAN: Can they do that? Can the FDA do that? Who can do that?

DR. GOTTLIEB: Well the FDA- it's going to take Congress. They did create provisions in the IRA to try to carve out some of these drugs, but the way they structured it, a lot of these sterile injectable drugs are still going to get caught in these price caps. And so it will take an act of Congress right now to modify the IRA to do that. I think people are looking at it. I think they recognize that there are structural features in this market that make this a recurring problem. This isn't a new problem, it's gotten worse over time. It's going to take Congress stepping in to do something to change the way these drugs are paid for.

MARGARET BRENNAN: And that brings us back to a problem we talked about weekly in terms of getting things passed right now. I want to ask you about COVID because I'd be remiss if I didn't acknowledge the end of the federal health emergency on May 11. What do you think the practical impact will be on people at home?

DR. GOTTLIEB: Well, I think the end of the public health emergency the practical impact is not going to be that significant to the average consumer. The administration took steps to extend certain things like telehealth, things that consumers were benefiting from. There is going to be an impact on Medicaid eligibility, you're going to see some people lose their Medicaid coverage, and some people not get automatically re enrolled and they won't know how to re enroll into that program. So there is going to be an increase in the uninsured as people get kicked off of the Medicaid rolls. Right now cases are down to very low levels, they're probably going to pick up going into the fall, but their- hospitalizations, over 9000 hospitalizations last week, that's a historical low through the pandemic. Excess deaths are back to the historical baseline, so things have improved dramatically. I do think cases are going to pick up as new variants start to emerge, but this will become a more manageable threat, hopefully.

MARGARET BRENNAN: Dr. Gottlieb Thank you always for your time. We'll be right back.