Shortage Within A Shortage: Baxter Adjusts Allocation Of I.V. Products As Shortage Drives Demand

Baxter cancels all old orders of I.V. solution products as shortage strikes up demand; company maintains initial increased demand sparked shortage, despite FDA manufacturing warning letters.

Baxter Healthcare Corp.’s shift in order fulfillment practices for its I.V. solution products appears to be a symptom of the market’s response to the products’ shortage more than the actual shortage itself.

The manufacturer is canceling existing backorders on March 24 to initiate a new allocation process for a number of I.V. solution products including certain sodium chloride injections and dextrose injections, a March 12 letter to customers said.

The cancelation of backorders, along with the new allocation process “will enable a speedier recovery and allow us to meet your most current product needs,” Baxter’s letter says. The drugs are currently in short supply due to “continuing unprecedented demand,” the company said.

The new allocation process will transition customers from monthly to weekly ordering. Customer’s current monthly allocation for each product code were divided into weekly allocations starting March 25. Orders in excess of allowable amounts will also be canceled, the company said. However, if less than the weekly allocation is ordered the excess quantity will be rolled into the following week’s allocation.

Stopping A Supply Panic

The change, particularly the cancellation of past orders, is likely necessitated by the increased demand for the products that began when the shortage came to a head in January, according to Erin Fox, director of the Drug Information Service at the University of Utah Health Center.

When hospitals don’t know when deliveries are going to come, that creates a great deal of stress and panic. “I think people started placing a lot of orders with Baxter to try and make sure that they had orders in place,” Fox explained.

“People are panicked and not able to know whether their next delivery is coming, so people have been placing many, many orders. I think they are just trying to wipe the slate clean and cancel everyone’s orders, and then new orders are for what customers used to order, not ten times what customers used to order.”

“People aren’t intentionally trying to hoard, but if you are placing an order and you don’t get it you are going to place another order and you are just going to keep placing orders,” Fox said, noting that Baxter is “probably seeing customers that have orders for products from multiples times and multiple dates and multiple places within the facility.”

If Baxter is “ever going to catch up, they just need to go back to sending hospitals the same amount they had been used to sending them each week,” Fox said.

Baxter initially began placing the I.V. solution products on allocation in the fall, but Fox said there was little worry at the time because hospitals were receiving 100% of their allocation.

The company told “The Pink Sheet” it has been manufacturing the solutions at maximum capacity in amounts exceeding those of prior years and is making investments to further increase supply this year. In 2013, it increased production capacity of I.V. solutions by 3% year over year and is investing in capacity to delivery 9% growth in 2014.

Baxter told health care providers it is “hopeful” they will see improvement in product availability at the end of April but “given prevailing marketing conditions, a definitive timeframe for full return to historic service levels is uncertain.”

Fox is hopeful the issue will be resolved by April, but said she is not holding her breath. “It takes a while for these shortages to die down. Baxter told us that they are running their factory 24/7 to try to catch up and meet demand and I don’t have visibility to all of Baxter’s orders … but it does seem like an optimistic estimate.”

The shortage is more likely to drag on until May or June, Fox said, adding she is worried about the potential for an underlying manufacturing problem that could exacerbate the situation.

Did Initial Demand Really Fuel Shortage?

Baxter, along with other companies experiencing shortages of I.V. fluids, particularly Hospira Inc., have blamed increased demand for the problem. Baxter said it began seeing increased demand for the products in the summer of 2013 and demand increased during an active flu season.

Fox questioned whether demand is the entire story. “Both companies tell us that it is increased demand and both companies have talked about increased demand due to a bad flu season, but to clinicians, and me personally, that is kind of an interesting reason because last year we also had a very severe flu season, with lots of increased hospitals admissions – but we didn’t have a saline shortage last year, so obviously something else is going on.”

Companies say the shortages are caused by increased demand for product, “yes, that’s a reason, but what’s behind that reason,” Fox said. “It’s not that huge of an increase in demand from just a flu season. Did they start out with low inventory or did their recalls contribute to low inventory? We don’t know.”

Manufacturing Woes Not To Blame: Baxter

Fox hypothesized that recalls at the companies may be partially to blame noting Baxter has had recent recalls for I.V. fluids for particles in solutions and Hospira has had recalls for leaking bags. But Baxter maintains neither recalls nor recent FDA enforcement actions are the cause of the shortages.

In late December Baxter recalled one lot of 5% dextrose injection, USP and four lots of 0.9% sodium chloride injection, USP due to particulates found in solution in the flexible plastic 50 mL and 100 mL containers (Also see "In Brief: Merck, Hospira, Baxter particulates, EU GMP deficiencies, gelatin imports, aseptic deficiencies, UK labeling recalls" - Pink Sheet, 15 Jan, 2014.). Baxter said these recalls were for smaller volume solutions that are not listed as being in shortage situation.

Baxter has also had its share of run-ins with FDA on manufacturing issues recently. It received a warning letter in May 2013 for widespread mold at one facility and leaky I.V. bags at another and FDA chastised the company for not fixing earlier sterility problems at some of its facilities.

The warning letter said that unless the company fixes the problems the company may face legal action such as a seizure or an injunction and it instructed Baxter to undertake a comprehensive and global assessment of its manufacturing operations (Also see "Contamination and Raw Material Testing Issues Raised in FDA Warning Letters" - Pink Sheet, 27 Sep, 2013.).

The company maintains “there is no connection between the 2013 Warning Letter and the increase in customer demand for I.V. solutions that Baxter has seen over the past number of months,” and that it is not relevant to the saline solution supply issue currently.

Baxter said it is working with FDA to help relieve the situation but would not comment on the nature of these efforts.

Fox said FDA has been looking into an imported option for the I.V. solution products but that the weight of the products poses a shipping challenge. Bad winter weather in the U.S. has also made the products difficult to ship, she said.

FDA confirmed it is seeking additional sources of supply but would not comment on the suppliers it is working with. The agency also would not say when it expected to see more of the products in the U.S.

Fox also said that one of the issues with the shortage is that even when there are other manufacturers making these products many hospitals are locked into buying from one supplier because the pumps and other equipment they use to dispense that medication dictates what company you purchase from.

Not On FDA’s Shortage List

The companies are all probably making just enough product to meet the demands of their contracts, Fox said, so when one company has a problem another can’t step in to supply other hospitals.

“There is no flesh in the system. One economist talked about this with me as revenge of the MBAs, where everything is so lean that you know there is absolutely no waste anywhere in the system, but all it takes is one little glitch along the way and we have a severe shortage,” Fox said.

Interestingly, not all of Baxter’s products that are undergoing allocation issues have made it on the FDA’s official shortage list. For example, the company is not listed under the shortage for dextrose products though Hospira and Amphastar Pharmaceuticals Inc. are.

FDA also said another Baxter product that is on the shortage list, nitroglycerin, could be on its way to improved availability in the coming weeks as it has identified another supplier. Baxter is currently the sole supplier of the product in the U.S. but due to delays in manufacturing is currently allocating product at 20% of normal supply.

FDA’s relationship with industry players is one of the interesting aspects of the broader shortage crisis. Both sides want to get product to market as soon as possible to generate sales and improve their images, but they still have some fundamental disagreements about how things are going (see related story, (Also see "Drug Shortage Optimism: FDA, Industry Expect Faster Resolution Than GPhA" - Pink Sheet, 26 Mar, 2014.)).