Short supplies and price increases give major hospital systems and philanthropies idea to launch nonprofit drug company

With more than 100 generic drug shortages and their rising costs plaguing hospitals around the country, several major hospital systems and philanthropies are fighting the problem head on by launching a nonprofit, generic drug company. Civica Rx, the new venture’s name, will be an independent company that plans to market 14 common drugs, which are in short supply and because of it, have risen in price as of recent.

Intermountain Healthcare, a company consisting of 22 hospitals based in Salt Lake City, and other hospitals, including Mayo Clinic and HCA Healthcare, teamed up alongside several philanthropies to launch this venture that will manufacture essential medications that are in short supply and have had “huge spikes” in price.

“Every day at Intermountain we manage more than 100 drug shortages, and most of them are generics,” Dr. Marc Harrison, president and CEO of Intermountain Healthcare, said. “The impact on patient care, in terms of trying to find alternatives and scurrying around and trying to find necessary drugs, is incredibly time-consuming and disconcerting.”

Civica Rx, which plans to apply to the FDA to make and sell new generic drugs in early 2019, was the idea of Dan Liljenquist, senior vice president and chief strategy officer at Intermountain, and is backed by several founding hospital systems as well as the Laura and John Arnold Foundation, the Peterson Center on Healthcare and the Gary and Mary West Foundation, NPR reported. Martin Van Trieste, the former executive for Amgen, was named Civica Rx’s CEO.

While Civica Rx plans to “start out by contracting with existing manufacturers to make the medications under its label,” NPR reported, the company said it will eventually manufacture on its own. Their commitment is to end the monopoly power over essential generic medications. And they will do so by requiring long-term contracts with hospitals who will commit to buying the medication at a fixed price no matter if another generic company lowers its prices.

Based on this principal, “unscrupulous” generic drug companies need to be aware, Harrison said.

“The folks who are gouging people and creating shortages, they know who they are,” Harrison said. “And they’re the ones who should be very concerned.”