Group of US Hospitals to Form Nonprofit Generic Drug Company

Four hospital groups, representing approximately 450 US hospitals, are planning to create their own nonprofit generic drug company in a bold move designed to address generic drug shortages and high prices affecting their hospitals.

There are currently 148 generic drugs facing shortages, according to the American Society of Health-System Pharmacists. Intermountain Healthcare, a nonprofit Salt Lake City, Utah, hospital group, is leading the effort to create about 20 pharmaceutical products, according to a CNBC report. Marc Harrison, MD, CEO of Intermountain Healthcare, did not name the specific drugs the group is planning to make in an effort to keep the details of the plan “close to the vest,” but analysts note that older, off-patent drugs like morphine, sodium bicarbonate, and the cardiac drug sodium nitroprusside are among the treatments often involved in shortages and sudden price increases.

“We are not going to lay down,” Harrison said of high costs and shortages. “We are going to go ahead and try to fix it.” He said the group would focus only on certain drugs where there are problems, not the entire generic drug industry. The hospitals are reacting to an acceleration of shortages and price escalations and previously have not been able to challenge what they say is an effort by some industry players to manipulate the generic drug market. Individuals and groups have attained sole control over a given drug, and create shortages and drive prices up, Harrison said, and patients can’t get the drugs they need. The consortium plans to create drugs in substantial quantities and at reasonable prices.

Intermountain executives said they would seek FDA approval to manufacture the drugs in question. Their plan seems to fit into the FDA’s June 2017 promise to take steps to expedite reviews of any generic drug applications for products on its list of off-patent and off-exclusivity branded drugs without approved generics to tackle drug competition and improve patient access.

Participants in the effort include the VA, Ascension Heatlh, SSM Heatlh, and Trinity Health. Anthony R. Tersigni, EdD, president and CEO of Ascension, a Catholic hospital system that is the nation’s largest nonprofit hospital group, said that the hospital executives felt they had little choice but to try to address the problems with generic drug pricing and shortages “head on” rather than waiting and hoping that generic drug companies would address it for them. Carolyn Clancy, MD, executive in charge of the VA, said that the department is interested in minimizing the impact of any shortages of generics, including saline fluids, and details of its possible involvement are being worked out.

One analyst, quoted in FiercePharma, said the move is less a broad play on the generic market than it is about targeting certain drugs; in addition, nonprofit hospitals make up only a fraction of the market, and the new company will take time to get set up. A spokesman for The Association for Accessible Medicines, a trade group for generic drug manufacturers, said the generic industry is premised on competition, and that its members generally welcome competition.

Members of the consortium will contribute funds to finance the new drug company, and some philanthropic groups may also contribute. Advisors to the consortium include retired Amgen executive vice president Madhu Balachandran, MS, MBA; Bob Kerrey, former Democratic Nebraska governor, and US Senator; Martin VanTrieste, retired Amgen senior vice president and chief quality officer; Don Berwick, MD, MPP, FRCP, former CMS administrator; and Clayton Christensen, MBA, professor at Harvard Business School and founder of Innosight.

The new company will initially focus on selling to hospitals, but may eventually expand to offer products more broadly. They expect the drugs to become available in 2019.