An article in the Economist (Sept 3, 2011, pg 29) describes the increase in drug shortages from 58 drugs in 2004 to 211 in 2010 and 198 by Sept 2011.  Most of these drugs are generics whose prices are set low by Medicare Part B, thus only justifying one or two manufacturers worldwide.  These drugs include cytarabine for leukamia, electrolytes for premature babies etc. As described in an earlier blog, Congressional focus is on requiring firms to inform the FDA in advance of impending shortages. In other cases, the FDA has permitted imports of drugs unapproved in the US as a last minute alternative. What is the fundamental fix – the monopoly of Medicare in setting prices that are too low ? Should hospitals bepermitted flexibility in pricing to prevent shortages ? Is there such a thing as too concentrated a supply base that is generating these risks ?