In a bid to combat the exorbitant, greed-driven pricing schemes of pharmaceutical companies and increase the availability of essential generic medications, seven large American hospital chains have joined forces to form a new non-profit drug company. The plans for this endeavor were first announced in January, and as of today, we now know the name, the leadership, and the initial game plan.
Civica Rx, as it will be known, will take its first steps toward improving the broken industry by manufacturing 14 generic drugs that are necessary stock at all hospitals but currently hard to come by due to nationwide shortages. The specific agents have not yet been released, but they were reportedly chosen from lists of drugs that underwent price increases of 50 percent or more between 2014 and 2016 or are in chronically low supply.
The company’s governing members include Intermountain Healthcare, Catholic Health Initiatives, HCA Healthcare, Mayo Clinic, Providence St. Joseph Health, SSM Health, and Trinity Health – companies that collectively represent about 500 hospitals across the country. Three large philanthropic organizations have also joined Civica Rx. Together, the consortium has pledged $100 million to begin operations.
According to their press release, more than 120 other health organizations representing one-third of all US hospitals have also expressed interest in joining or otherwise supporting Civica Rx.
Dan Liljenquist, senior vice president and chief strategy officer at Intermountain Healthcare in Utah, and the man who dreamed up Civica Rx (he’s now the company chair), told The Washington Post: “We’re trying to do the right thing – create a first-of-its-kind societal asset with one mission: to make sure essential generic medicines are affordable and available to everyone.”
The company’s business model will be to produce large supplies of the 14 generics and sell them at transparent prices to their member hospitals as well as other organizations that are willing to sign long-term contracts. Civica Rx will either open their own FDA-approved manufacturing facilities or contract out to existing labs, but either way, they state that their first generics should be available as early as 2019.
And with an enormous guaranteed customer base for its products, Civica Rx will not only stabilize supplies of several key drugs, it could also make a lasting impact on the industry as a whole.
Though private companies may like to argue otherwise, past research has proven that competition among manufacturers offering the same drug results in lower prices, which in turn leads to a reduced burden on thinly stretched hospital budgets. The end result is more efficient healthcare centers and lower out-of-pocket costs for patients. The obscene price hikes that are becoming common in the industry typically arise when only one company offers a drug. For example, in 2015, a company called Turing Pharmaceuticals became the sole source for a decades-old antiparasitic drug called pyrimethamine; they subsequently raised the price by more than 5,500 percent. (You might have heard of the debacle through the despicable antics of Turing's leader, Martin Shkreli.)
“We want the marketplace to take care of itself and work, so if the entrance of Civica with 14 drugs – and the threat we can do more, pretty quickly, makes the marketplace work better, probably we don’t grow much bigger than that,” Civica’s newly appointed CEO, Martin VanTrieste, told The Washington Post. They will consider expanding “if the marketplace is broken and can’t be fixed by adding just 14 drugs.”
VanTrieste, a former executive at the pharma giant Amgen, came out of retirement to serve at Civica under the condition that he earns a $0 salary.
[H/T: The Washington Post and NPR]
