The Complexities of Drug Shortages and the Fall of Elizabeth Holmes: A Tale of Transparency and Accountability

Ben H.

Hatched by Ben H.

Jul 10, 2023

4 min read


The Complexities of Drug Shortages and the Fall of Elizabeth Holmes: A Tale of Transparency and Accountability


The healthcare industry is currently grappling with a significant problem: drug shortages. This issue not only affects chemotherapy medications but also various other pharmaceuticals, creating a strain on healthcare providers and compromising patient care. The lack of transparency in the pharmaceutical supply chain exacerbates this problem, making it difficult for health systems to address the core issue of insufficient drug supply. In addition to these drug shortages, the recent conviction of Elizabeth Holmes, the founder of Theranos, sheds light on the need for accountability and transparency in the healthcare industry.

The Complexities of Drug Shortages:

Drug shortages have become a recurring problem in the healthcare industry, particularly with chemotherapy drugs like cisplatin. The supply-demand imbalance for many medications indicates that this issue is likely to persist. Healthcare providers are left with no choice but to ration doses and delay care, which can have serious consequences for patients. The practice of conserving drugs and seeking alternative suppliers or substitute medications not only jeopardizes patient safety but also limits access to care and affects hospital margins.

The Lack of Transparency in the Pharmaceutical Supply Chain:

The pharmaceutical supply chain is a convoluted network of suppliers, subcontractors, and middlemen, making it challenging to pinpoint the exact reasons behind drug shortages. Large manufacturers often use subcontractors, and their production capacity remains largely unknown to health systems. Manufacturers are not obligated to provide specific reasons for shortages publicly, leaving healthcare providers in the dark. Despite advocacy groups' efforts and pleas to Congress for transparency, reliable information regarding suppliers' reliability and proficiency remains elusive.

The Role of Wholesalers, Group Purchasing Organizations, and Pharmacy Benefit Managers:

Manufacturers distribute drugs to wholesalers, group purchasing organizations (GPOs), and sometimes directly to pharmacies or hospitals. GPOs have even created private drug labels, contracting directly with manufacturers to produce generic drugs under their own brand names. Pharmacy benefit managers (PBMs) and payers negotiate rebates and discounts with manufacturers on behalf of health plans and employers. PBMs also design formularies, which determine the coverage of drugs under the health plan. However, when demand surges and supply diminishes, prices skyrocket. Hospitals often lack the flexibility to renegotiate reimbursement with insurers in real time, leaving them to assume the higher costs.

The Financial Implications and Impact on Patient Care:

Hospitals face financial challenges due to drug shortages. Medicare and Medicaid pay fixed rates, making it difficult for hospitals to cope with the increased costs. In some cases, Medicare offers temporary reimbursement boosts to offset the expenses associated with high-priced therapies. However, delaying care also affects revenue. Hospitals may have to postpone elective procedures, which are significant revenue generators, if they do not have essential supplies like saline to stabilize patients during surgery. Moreover, providers may be forced to prioritize doses for the most critical patients, leaving others in a vulnerable position. Clinical trials have also been affected by drug shortages in the past, potentially delaying breakthrough treatments.

The Fall of Elizabeth Holmes and the Need for Accountability:

The conviction of Elizabeth Holmes, the founder of Theranos, for misrepresenting her startup's technology and business performance highlights the importance of accountability and transparency in the healthcare industry. Holmes was sentenced to serve 135 months in prison and pay $452 million in restitution to her investors. However, given her limited assets, the chances of recovering these funds are slim. This case serves as a reminder that individuals who manipulate and deceive in the healthcare industry must be held accountable for their actions.

Actionable Advice:

  • 1. Promote Transparency: Advocacy groups and healthcare organizations should continue to push for increased transparency in the pharmaceutical supply chain. This includes the disclosure of specific reasons for drug shortages and the identification of reliable and proficient suppliers.
  • 2. Diversify the Supply Chain: Health systems should explore partnerships with multiple suppliers to mitigate the risks of drug shortages. By diversifying their supply chain, providers can have access to alternative sources during times of scarcity.
  • 3. Advocate for Policy Changes: Healthcare providers, advocacy groups, and industry leaders should actively engage with policymakers to address the underlying issues contributing to drug shortages. By advocating for policy changes that promote accountability, transparency, and increased production capacity, the healthcare industry can work towards long-term solutions.


The complexities of drug shortages and the fall of Elizabeth Holmes highlight the urgent need for transparency and accountability in the healthcare industry. Healthcare providers must navigate the challenges posed by limited drug supply, while policymakers and industry leaders must work towards establishing a more transparent and efficient pharmaceutical supply chain. By taking actionable steps to promote transparency, diversify the supply chain, and advocate for policy changes, the healthcare industry can mitigate the impact of drug shortages and ensure the provision of high-quality care to patients.

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