Government Response to Drug Shortages: Federal Actions and Policy Shifts in 2025-2026

By the end of 2024, the U.S. faced drug shortages at levels not seen in decades. Over 300 medications were in short supply - from antibiotics and anesthetics to life-saving cancer drugs. Hospitals scrambled. Pharmacists spent hours tracking down alternatives. Patients skipped doses or waited weeks for treatment. The problem wasn’t random. It was systemic. And the federal government finally started acting - but not always in ways that fix the root causes.

What’s Really Behind the Shortages?

It’s not just bad luck. Most drug shortages trace back to one thing: manufacturing concentration. Just five facilities produce 78% of all sterile injectables in the U.S. One machine breaks. One factory shuts for inspection. One supplier in China delays a shipment. And suddenly, hospitals are out of saline, insulin, or chemotherapy drugs.

The U.S. imports about 80% of its active pharmaceutical ingredients (APIs) - the core chemical components that make drugs work. China and India dominate that supply chain. Why? Because it’s cheaper. But cheap doesn’t mean safe or reliable. When geopolitical tensions rise, or a factory fails an inspection, the ripple effect hits American patients.

And here’s the kicker: many of these drugs are low-margin. No company wants to invest in making a $0.10 generic antibiotic when they can make a $500 cancer drug. So production concentrates in a few places, with little backup. When something goes wrong, there’s no Plan B.

The Strategic Active Pharmaceutical Ingredients Reserve (SAPIR)

In August 2025, President Trump signed Executive Order 14178, expanding the Strategic Active Pharmaceutical Ingredients Reserve - SAPIR. This isn’t about stockpiling finished pills. It’s about storing the raw chemicals needed to make 26 critical drugs: antibiotics, heart meds, cancer treatments, and anesthetics.

Why APIs? Because they’re 40-60% cheaper to store than finished drugs. They last 3-5 years longer. And if you’ve got the chemical, you can make the drug quickly when needed. The goal: reduce dependence on foreign suppliers and create a buffer against supply chain shocks.

The Department of Health and Human Services (HHS) now manages SAPIR through the Administration for Strategic Preparedness and Response (ASPR). As of late 2025, the reserve holds enough API to produce over 10 million doses of key medications. Early results? HHS claims 12 potential shortages of antibiotics were avoided since August 2025. But there’s no public audit to verify that.

Critics say the list of 26 drugs is dangerously narrow. The FDA’s own data shows oncology drugs make up 31% of all shortages - yet only 4% of SAPIR’s targets are cancer medications. Meanwhile, hundreds of other essential drugs remain unprotected.

Regulatory Changes and Reporting Rules

The FDA has long required manufacturers to report potential shortages six months in advance. But compliance? Only 58%. Small manufacturers - the ones most likely to face production hiccups - fail to report at rates above 80%.

In 2025, the FDA launched its Enhanced Shortage Monitoring System. It uses AI to track 17 data streams: shipping logs, hospital purchase patterns, factory batch records, even social media chatter from pharmacists. The system predicts shortages with 82% accuracy, up to 90 days ahead. That’s a real win.

But here’s the problem: the administration rolled back Biden-era rules that forced companies to disclose supply chain risks. Transparency was traded for control. And without mandatory reporting, the FDA is flying blind on many fronts.

Meanwhile, the FDA’s own internal review leaked to STAT News concluded: even with all current measures, only 15-20% of projected shortages will be prevented over the next three years. Why? Because stockpiling doesn’t fix broken manufacturing. It just delays the crash.

Legislative Efforts: H.R.5316 and the Drug Shortage Prevention Act

Congress is trying to help. H.R.5316, the Drug Shortage Act, would let pharmacists use compounded versions of shortage drugs more easily - especially for patients who can’t wait. It also creates a national registry to track alternative suppliers. The Congressional Budget Office estimates it would cut shortages by 15-20% at a cost of $740 million over five years.

The bipartisan Drug Shortage Prevention and Mitigation Act goes further. It proposes Medicare payments to hospitals that maintain backup supply chains. Right now, hospitals spend an average of $1.2 million a year just managing shortages - hiring extra staff, training teams, paying premium prices for last-minute imports. This bill would reward them for preparing ahead.

But neither bill tackles the core issue: the economic disincentive to make cheap, essential drugs. No amount of legislation will fix that unless the government changes how it pays for them.

Why Domestic Manufacturing Isn’t Working

The U.S. wants to bring drug production home. The CHIPS Act now includes $285 million for pharmaceutical manufacturing. Sounds good - until you realize it’s less than 5% of what’s needed to build enough new facilities to make a real difference.

Starting a new API plant in the U.S. takes 28 to 36 months for FDA approval. In the EU? 18 to 24 months. The extra time and cost scare off investors. And even when new plants open, 42% of them are still overseas - in Ireland, Singapore, not Ohio or Pennsylvania.

The Government Accountability Office found that after seven years and billions in federal spending, only 12% of critical API production has been successfully moved back to the U.S. The rest? Still overseas. And still vulnerable.

What’s Working - And What’s Not

The only federal initiative with clear, measurable success? The FDA’s Early Notification Pilot Program. Hospitals that joined saw shortage durations drop by 28%. Why? Because they got early warnings. They had time to find alternatives, adjust orders, train staff.

But the current administration has weakened that program. Reporting requirements are looser. Enforcement is weaker. The FDA issued only 17 warning letters for failure to report shortages between 2020 and 2024. The EU issued 142 under similar rules.

Meanwhile, the European Union’s centralized system - where member states share stockpiles and data in real time - cut shortages by 37% between 2022 and 2024. The U.S. has no such system. There’s no national dashboard. No coordinated response. Just a patchwork of disconnected programs.

Real Impact on Patients and Providers

This isn’t theoretical. In August 2025, the American Hospital Association surveyed 1,200 hospitals. Results:

• 89% had to substitute drugs - often with less effective or riskier alternatives
• 68% reported treatment delays
• 42% said substitutions led to medication errors
• 74% of pharmacists spent 10+ hours per week just managing shortages

On Reddit, pharmacists shared stories: compounding cisplatin from raw chemicals. Switching between five different manufacturers for the same drug in one week. Running out of epinephrine during a code blue.

Patients aren’t just inconvenienced. One in four Americans skipped doses because a drug wasn’t available. Cancer patients? Two out of three had to change their treatment plan. That’s not a supply chain issue. That’s a public health emergency.

The Bigger Picture: Economics Over Safety

The U.S. spends $5.2 billion a year dealing with drug shortages - not in patient care, but in management, overtime, emergency imports, and lost productivity.

Yet the federal budget for biomedical innovation - the research that could build better, more resilient manufacturing - dropped 18% from 2024 to 2025. Meanwhile, funding for FEMA’s emergency response and state health grants was cut by over 20%.

The real problem isn’t a lack of stockpiles. It’s a lack of will to fix the market. Why do companies avoid making cheap drugs? Because Medicare and Medicaid pay so little for them. Because there’s no guarantee they’ll get paid if they invest in redundancy. Because the system rewards profit over preparedness.

No amount of AI, stockpiles, or executive orders will fix that. Until the government changes how it pays for essential medicines - until it makes producing them profitable - shortages will keep coming. And patients will keep paying the price.

What Comes Next?

By mid-2026, 14 new applications for second-source manufacturers are under review by the FDA. If approved, they could add backup production for eight critical shortage-prone drugs. That’s progress.

But it’s not enough. The system needs:

• Mandatory, real-time reporting from all manufacturers - not just the big ones
• Medicare reimbursement changes that make low-margin drugs financially viable
• A national drug supply dashboard, like the EU’s, with live data from hospitals, pharmacies, and distributors
• Fast-track approval for domestic API plants - cut the 36-month wait to 18
• Public investment in continuous manufacturing tech - the kind that can switch production lines in days, not months

Right now, the U.S. is treating symptoms, not the disease. Stockpiling APIs is like keeping extra tires in your garage because your car keeps blowing them out. You still need to fix the alignment.

The tools are there. The data is there. The will? Still missing.