By mid-2025, drug shortages have hit levels not seen since the pandemic. But this isn’t about supply chain hiccups or factory fires. It’s about money. Manufacturers are caught in a squeeze: costs keep climbing, prices can’t follow, and profits are vanishing. When a pill costs more to make than it can legally be sold for, companies stop making it. And that’s exactly what’s happening across the generic drug market.
Why Generic Drugs Are Disappearing
Generic drugs make up 90% of prescriptions in the U.S. and Europe. They’re cheap, effective, and essential. But that’s also their downfall. When a drug’s patent expires, dozens of manufacturers jump in. Competition drives prices down-sometimes to pennies per tablet. In 2025, the average price for a 30-day supply of a generic antibiotic like amoxicillin is under $2. Some are sold for less than 50 cents. Meanwhile, the cost to produce it? Up 27% since 2022.
Raw materials like active pharmaceutical ingredients (APIs) are harder to get and more expensive. Most APIs come from India and China. Trade restrictions, export bans, and climate-related factory shutdowns have disrupted supply. Tariffs added another layer: in 2025, the U.S. imposed new duties on over 120 pharmaceutical inputs, raising input costs by 8-15% for many manufacturers. But they can’t just raise prices. Pharmacies, insurers, and government programs like Medicare have fixed reimbursement rates. If you charge more, you lose the contract.
Result? Manufacturers walk away. In Q2 2025, the FDA recorded 312 active drug shortages. Of those, 78% were generics. Insulin, heparin, IV fluids, and antibiotics were among the most affected. One company producing a common blood thinner saw its profit margin shrink from 12% to 1.4% in 18 months. They shut down the line.
The Financial Tightrope
It’s not just about the cost of chemicals. It’s everything. Labor is more expensive. Compliance with FDA and EMA regulations takes more time and money. Packaging materials? Up 19%. Energy for sterile production? Up 22%. A small manufacturer in Ohio told a trade journal they spent $1.2 million more in 2025 to make the same volume of pills as in 2023. Their revenue? Down 5%.
Meanwhile, the big players are pulling back too. Companies that once made dozens of generics now focus on just the top 10 most profitable ones. The rest? Left to smaller firms with thinner margins and less financial cushion. When one of those small makers fails, there’s no backup. No redundancy. No safety net.
And it’s not just about money. It’s about risk. Building a new production line for a generic drug takes 18-36 months and $20-50 million. No investor wants to put that kind of money into a product that might be priced into oblivion next year. So no new capacity is being built. The system is aging out.
Who Pays the Price?
Hospitals are scrambling. Emergency rooms are rationing IV saline. Oncologists are delaying treatments because the chemo drugs aren’t in stock. Nurses are spending hours tracking down alternatives. One nurse in Chicago told a reporter she spent three days trying to find a substitute for a generic sedative used during intubation. She found one-but it required a different dosing protocol, increasing the risk of error.
Patients are paying too. When a drug is unavailable, doctors prescribe something more expensive. A generic antibiotic that cost $1.50 might be replaced by a branded version costing $85. Insurance doesn’t always cover the difference. Patients end up paying out of pocket-or going without.
And it’s not just the U.S. The EU, Canada, and the UK are seeing the same pattern. In the UK, the NHS reported a 40% increase in drug shortages between 2023 and 2025. Many of the same manufacturers supply both markets. When they cut production, it’s global.
Why Solutions Are Hard to Find
Some suggest government price controls. But that’s a trap. If you force prices higher, you risk inflation and public backlash. If you keep them low, manufacturers leave. Others push for domestic production. But building a new API plant in the U.S. or Germany costs $300 million and takes five years. Even then, it’s not guaranteed to be profitable.
There are smarter moves being tried. A few manufacturers are forming alliances-sharing supply chains, pooling orders for raw materials, or co-investing in backup suppliers. One group of six generic makers in Germany pooled their API purchases and cut costs by 21% in 2024. Another started using AI to predict which drugs are most likely to run out, so they can ramp up production before shortages hit.
But these are exceptions. Most companies are too small, too isolated, or too financially strained to innovate. And regulators? They’re still focused on safety, not sustainability. The FDA approves drugs based on purity and efficacy-not whether the maker can stay in business.
What’s Next?
The trend isn’t reversing. Raw material costs are projected to rise another 3% in 2026. Tariffs aren’t going away. And consumer demand for cheap drugs isn’t fading. The system is built on a lie: that generics will always be cheap because they’re simple to make. But they’re not simple anymore. They’re complex, regulated, and tied to global politics.
Without intervention, shortages will get worse. More drugs will disappear. More patients will suffer. And the cycle will continue: low prices → no profit → no production → shortage → higher prices → public outrage → political pressure → temporary fixes → back to low prices.
The answer isn’t just more money. It’s a new model. One where generic drugs are valued not just by their cost, but by their necessity. Where manufacturers aren’t punished for making essential medicines. Where governments pay a fair price-not the lowest possible price-for drugs that keep people alive.
Otherwise, the next drug you need might not be available. Not because it’s hard to make. But because no one can afford to make it anymore.
