More than 90% of prescriptions in the U.S. are filled with generic drugs. They’re cheaper, widely available, and trusted. But if you’ve recently been told your usual medication is out of stock-whether it’s levothyroxine, epinephrine, or an antibiotic-you’re not alone. In October 2023, the FDA listed 278 active drug shortages, the highest number since tracking began in 2011. And 67% of them? Generic drugs.

How We Got Here: The Rise and Fall of the Generic Market

The 1984 Hatch-Waxman Act was supposed to make medicines affordable. It let companies copy brand-name drugs after patents expired, as long as they proved they worked the same way. The result? A booming market where generics took over 90% of prescriptions but only 20% of total drug spending. Sounds smart, right?

But here’s the catch: the system was built on one assumption-that companies could make these drugs cheaply and still make money. That assumption broke.

Today, the average profit margin for a generic drug is 15-20%. For some, it’s below 5%. Compare that to branded drugs, which often have 70-80% margins. That’s not a gap. That’s a canyon.

When one manufacturer lowers their price by a fraction of a cent per pill, others have to follow. Soon, no one can afford to make the drug profitably. And when that happens, they stop making it.

The Global Supply Chain That Can’t Hold Up

Most generic drugs aren’t made in the U.S. They’re made in pieces.

The active ingredient (API)-the part that actually treats your condition-is often produced in India or China. Then it’s shipped to another country for mixing with fillers. Then to a third for coating. Then to a fourth for packaging. Each step adds risk.

The FDA found that 97% of antibiotics, 92% of antivirals, and 83% of the top 100 generic drugs in the U.S. have no API source in America. That means if a factory in India shuts down-or if China halts exports, like it did in early 2020 with acetaminophen-millions of Americans suddenly can’t get their meds.

In 2022, the FDA pulled Intas Pharmaceuticals’ cancer drug cisplatin off the market after finding “enormous and systematic quality problems.” That wasn’t an accident. It was the result of a system that rewards low cost over reliable quality.

Why Modern Manufacturing Isn’t Happening

There’s a better way to make drugs: continuous manufacturing. Instead of making batches in huge vats, this method runs drugs through a steady pipeline with real-time quality checks. It’s safer, more precise, and less prone to contamination.

But it costs $50-100 million to install. For a brand-name company with big profits? Easy. For a generic maker scraping by on pennies per pill? Impossible.

Group purchasing organizations (GPOs) and pharmacy benefit managers (PBMs) sign contracts based on price alone. Sometimes, the difference between winning and losing a contract is less than one-tenth of a cent per tablet. Why would a company invest millions in better tech when they’re being paid less than the cost of the plastic bottle?

The Human Cost of Shortages

When a drug disappears, patients don’t just wait. They suffer.

A nurse practitioner in Ohio reported switching 89 patients off levothyroxine because of a shortage. Each one had to be monitored for thyroid levels, heart rate, and symptoms. One patient ended up in the ER after her dose was wrong.

A Medicare beneficiary in Texas saw her heart medication jump from $10 a month to $450 when the generic ran out and she had to switch to the brand name.

In hospitals, pharmacists are forced to substitute drugs that aren’t ideal. One pharmacist on Reddit said they’d switched antibiotics for 17 different infections in six months. Some alternatives are less effective. Some cause more side effects. Some aren’t even approved for the same condition.

A 2023 study found generic drugs made in India were linked to 54% more serious adverse events-including hospitalizations and deaths-than the same drugs made in the U.S. It doesn’t mean all Indian-made drugs are dangerous. But it does mean the quality control system is stretched thin.

Why the U.S. Can’t Just Make More Here

Building a single FDA-compliant drug factory in the U.S. costs $250-500 million. It takes 3-5 years. In India? $50-100 million and half the time.

Even if a company wanted to build here, the FDA’s inspection process is brutal. Unannounced visits. 5-7 years of documentation. If you get a Form 483 (a list of violations), fixing it costs $1.7 million and takes 12-18 months. One mistake, and your entire production line is shut down.

U.S. manufacturers maintain 95%+ accuracy in batch records. Some foreign facilities? As low as 78%. That gap isn’t just paperwork-it’s patient safety.

The Bigger Picture: A Market Designed to Fail

This isn’t a glitch. It’s the design.

The system rewards the lowest price, not the most reliable supply. It punishes investment in quality. It ignores the fact that drugs aren’t widgets-they’re life-saving tools.

The top five generic manufacturers now control 48% of the market. In 2010, it was 22%. That’s consolidation. That’s fewer players. That’s less competition. And that means even less pressure to invest in resilience.

Over the past decade, 37% of U.S.-based generic manufacturers have shut down or operate with idle capacity. The domestic API production footprint has dropped from 35% in 2010 to just 14% in 2023.

What’s Being Done? (And Why It’s Not Enough)

The FDA has a Drug Shortage Task Force. Congress passed the CREATES Act in 2019 to stop brand-name companies from blocking generic competitors. The Biden administration added $80 million in 2024 to inspect foreign factories.

But $80 million for 72% of drug factories located overseas? That’s less than $1,000 per facility. The FDA can’t even inspect every plant once every five years.

New legislation in 2023 proposed tax breaks for domestic API production and strategic stockpiles of critical drugs. That’s a start. But without fixing the pricing model, none of it will stick.

What Can Be Done?

Real change needs three things:

• Price floors-not just lowest bid. Contracts should guarantee enough profit to cover quality and safety.
• Domestic incentives-tax credits, grants, or low-interest loans to build U.S. API plants.
• Supplier diversification-stop relying on just two countries for 80% of your essential medicines.

Some hospitals are already trying this. In 2023, 68% of health systems reported bypassing GPOs to negotiate direct contracts with manufacturers. That’s a step toward valuing reliability over price.

What This Means for You

If you take a generic drug every day, you’re living in a system that’s on the edge. You might not know it. But if your pharmacy calls to say your usual pill isn’t available, and you’re forced to pay 40 times more-or switch to a different drug-you’re seeing the cracks in real time.

The next time you hear about a drug shortage, don’t think it’s bad luck. It’s the result of a market that chose price over people. And until that changes, the shortages won’t stop.

It’s not about making generics expensive. It’s about making them sustainable.