Pricing Pressure and Shortages: How Supply Crunches Are Hitting Health Care Costs

When medicines disappear and prices spike

It’s November 2025. You walk into your local pharmacy to refill your blood pressure medication. The pharmacist shakes their head. "We’re out. No shipments in until January." You ask about alternatives. They tell you one option costs 300% more. This isn’t a one-off. It’s happening across Australia, the U.S., and Europe. Medications, medical devices, even basic supplies like IV bags and syringes are vanishing. And when they’re available, the price tag is brutal.

This isn’t just bad luck. It’s the result of deep, interconnected economic forces: pricing pressure and shortages. These aren’t abstract terms. They’re real, daily realities for patients, doctors, and hospitals. And they’re driving up the cost of health care faster than wages or inflation can keep up.

Why do drugs suddenly disappear?

Shortages don’t happen because no one makes the drug. They happen because the system can’t keep up. Take the case of generic injectable antibiotics. In 2021, a single factory in India that produced 40% of the world’s supply shut down for regulatory issues. That one event triggered global shortages. Why? Because most countries rely on just one or two suppliers for these low-margin drugs. When one fails, there’s no backup.

Supply chains in health care are built for efficiency, not resilience. Companies cut costs by outsourcing production to low-wage countries, minimizing inventory, and relying on just-in-time delivery. That works fine until a storm hits - like the pandemic, war in Ukraine, or a port strike. Then everything freezes. The San Francisco Federal Reserve found that supply chain disruptions raised U.S. goods inflation by up to 1.5 percentage points during 2021-2022. For medicines, the impact was worse. A 2023 study showed that 72% of critical drug shortages were tied directly to foreign production delays.

Why do prices jump when supplies drop?

Basic economics says: less supply, higher price. But in health care, it’s messier. When a drug becomes scarce, manufacturers don’t always raise prices immediately. Sometimes they wait. But when they do, they know patients have no choice. A 2022 U.S. Government Accountability Office report found that when a single-source generic drug faced a shortage, its price increased by an average of 420% within six months.

It’s not just the drug makers. Distributors and pharmacies also adjust prices. With limited stock, they prioritize buyers who pay more - hospitals over clinics, private insurers over public programs. This creates a two-tier system: those who can afford it get the medicine. Those who can’t wait, or pay, go without.

Price controls make it worse. In the UK, the government capped how much pharmacies could charge for certain drugs. The result? Suppliers stopped delivering. Between August and December 2021, 27 small health care suppliers went bankrupt because they couldn’t cover costs. The same thing happened in Australia with insulin and asthma inhalers in 2023. When prices can’t rise to match scarcity, supply vanishes.

Who pays the biggest price?

It’s not the big hospital chains or insurance companies. It’s the patient.

People with chronic conditions - diabetes, heart disease, epilepsy - are hit hardest. When their insulin, metformin, or seizure meds go out of stock, they don’t just miss a dose. They risk hospitalization. A 2023 study in The Lancet found that drug shortages in Australia led to a 17% increase in emergency visits for uncontrolled diabetes over a 12-month period.

Low-income patients are the most vulnerable. They can’t afford to switch to expensive alternatives. They can’t travel to another pharmacy. They can’t wait months for a shipment. In Melbourne, a 68-year-old woman with rheumatoid arthritis skipped her biologic injections for five months because her Medicare subsidy didn’t cover the new, higher price. Her joint damage worsened. She now needs surgery.

Even when the drug is available, the cost burden shifts. Insurers raise premiums. Employers cut benefits. Patients pay more out-of-pocket. The average Australian now spends 18% more on prescription drugs than they did in 2019 - and that’s before factoring in the hidden cost of missed work or delayed treatment.

Why aren’t more drugs being made locally?

It’s cheaper to make pills in India or China. Labor is cheaper. Regulations are looser. But that’s the problem. When 80% of active pharmaceutical ingredients come from just two countries, you’re one geopolitical crisis away from chaos.

Some governments are trying to fix this. The U.S. passed the CHIPS and Science Act to boost domestic production. Australia’s Therapeutic Goods Administration now offers fast-track approval for local manufacturers of critical drugs. But building a new factory takes five years. And it costs hundreds of millions. No company will invest unless they’re guaranteed buyers - and that means government contracts.

Germany tried a different approach in 2021. They temporarily relaxed competition rules so that drug makers could share production capacity. The result? Pharmaceutical shortages dropped by 19% in six weeks. Australia could do the same. But political will is weak. It’s easier to blame “global supply chains” than to fund local solutions.

What’s being done - and what’s not

Some hospitals are stockpiling. They’re buying six months’ worth of insulin or antibiotics, even if it ties up cash. That helps - but it’s not sustainable. And it doesn’t help smaller clinics or pharmacies.

Others are switching to alternatives. But not all drugs have safe substitutes. For rare cancers or autoimmune diseases, there’s often only one effective treatment. When it’s gone, there’s no Plan B.

Technology offers hope. Digital supply chain tracking tools help predict shortages before they happen. One Australian hospital system reduced drug stockouts by 31% in 2024 by using AI to monitor global supplier data. But these tools are expensive. Only big institutions can afford them.

The real fix? More diversity. More local production. Better government coordination. And a shift away from the idea that health care should be treated like a commodity - where the cheapest bid wins, no matter the risk.

What patients can do

It’s not fair that patients have to become supply chain experts. But here’s what helps:

• Ask your pharmacist about alternatives - even if they’re more expensive. Sometimes a different brand or formulation is available.
• Keep a 30-day supply of essential meds. Don’t wait until you’re out.
• Join patient advocacy groups - they’re pushing for policy changes on drug access and pricing.
• Report shortages to your national health authority. The more reports, the more pressure to act.

One woman in Adelaide started a simple spreadsheet tracking which pharmacies had metformin in stock. She shared it with her diabetes support group. Within months, 200 people were using it. That’s not a policy change - but it saved lives.

The road ahead

Supply chain pressures have eased since 2022. Global shipping delays are down. Inflation is cooling. But the underlying problems haven’t gone away. Climate change is disrupting crop harvests for plant-based drugs. Geopolitical tensions are forcing companies to rethink where they make things. Labor shortages in manufacturing persist.

The International Monetary Fund predicts supply chain disruptions will stay 15-20% above pre-pandemic levels through 2025. That means more shortages. More price spikes. More people choosing between medicine and rent.

Health care isn’t just about doctors and hospitals. It’s about the invisible systems that deliver pills, syringes, and vaccines. When those systems break, people suffer. And the cost isn’t just financial - it’s measured in missed birthdays, delayed treatments, and lives cut short.

Fixing this won’t be easy. But ignoring it will cost far more.