In contrast, generic drugs have become low-margin commodity products. Because of that, makers of generic drugss lack both the economic incentives and the resources to invest in more reliable manufacturing. One consequence is the greater propensity of makers of generic drugs to experience manufacturing quality problems that halt production, generating shortages.

The marginal economics of generic-drug manufacturing also explain why much of it has migrated to countries with lower cost structures, such as India and China. Yet, proposals to “re-shore” generic-drug manufacturing aren’t a complete solution either, as the same problems occur domestically because the same basic economics apply.

To effectively address the root causes, Congress and the FDA need to implement a set of reforms that identify, and publicly report, manufacturers that invest in more reliable production and that encourage wholesale purchasers to contract with more reliable manufacturers.