Regulation and drug shortages

From the Marginal Revolution blog:

The FDA began to ramp up GMP rules and regulations under the new commissioner in 2010 and 2011. In fact, the report indicates that FDA threats shut down some 30% of the manufacturing capacity at the big producers of generic injectables. The safety of these lines was not a large problem and could have been handled with a targeted approach but instead the FDA launched a sweep against all the major manufacturers at the same time. These problem have been exacerbated by a change in Medicare reimbursement rules and by the rise of GPOs (buying groups) which reduced the prices of generics. Thus, in response to the cut in capacity, firms have shifted production from less profitable generics to more profitable branded drugs, so we get shortages of generics rather than of branded drugs. 

Add to these major factors a few unique events such as the FDA now requiring pre-1938 and pre-62 drugs to go through expensive clinical trials, the slowdown of ANDAs and crazy stuff such as DEA control over pharmaceutical manufacturing and you get very extensive shortages.