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What Is Causing Drug Shortages?
The Health Care Blog

A number of people have asked me what is causing the current shortages in certain types of drugs. Here’s what I’ve been able to discern so far: In general, there are two reasons why shortages might appear in a market. The first is high fixed costs. These include regulatory costs, the costs of converting a manufacturing plant to a new use, or the costs of creating a new factory. Industries with high fixed costs will see temporary shortages after either supply shocks (e.g., a factory goes offline) or demand shocks (e.g., an increase in the population needing a drug).