Health foundations band together to develop their own generic drugs

Three health foundations are teaming up to create a new not-for-profit entity that will develop generic drugs, helping address chronic shortages and rising drug prices. The new generic drug company, Civica Rx, also brings together seven large U.S. hospital systems representing roughly 500 hospitals as governing members.

The Laura and John Arnold Foundation, the Peterson Center on Healthcare and the Gary and Mary West Foundation, along with several U.S. hospitals are initial governing members, including Catholic Health Initiatives, HCA Healthcare, Intermountain Healthcare, Mayo Clinic, Providence St. Joseph Health, SSM Health and Trinity Health. Each has committed $10 million to fund the company.

Martin VanTrieste, former chief quality officer for pharmaceutical company Amgen, has been named CEO of Civica Rx. He is foregoing any salary to serve in the role.

Civica Rx will start with 14 hospital-administered generic drugs as its focus to help stabilize a supply of medications that have fallen into shortage situations, with the first products expected to be released as early as 2019.

For many hospitals, critical shortages of generics can have huge impacts on patients. The shortages have become front and center for hospitals over the last few years, forcing clinicians to be crafty and hospital purchasing agents to source the commonplace medications.

"Every day at Intermountain we manage more than 100 drug shortages, and most of them are generics," Marc Harrison, MD, president and CEO of Intermountain Healthcare, told NPR of the mounting issue. "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."

The formation of Civica Rx also comes at a time when drug prices continue to rise, increasing overall healthcare costs across the industry. The Trump administration has made some efforts to lower drug prices through its blueprint, but nothing long-term has come into effect yet. Drug companies have also been accused of a price fixing scheme by Humana and are facing investigations from the Department of Justice over prices.

"The chronic shortage of critical drugs compounded with skyrocketing prices is a double blow to our most disadvantaged populations," Kelli Rhee, president and CEO of the Laura and John Arnold Foundation, said in a statement. "As we continue to pursue more comprehensive solutions, this initiative will disrupt the current market dynamic and provide short-term relief."

Each philanthropic member has committed $1 million to Civica Rx and $9 million in loans to be used by the company in the future as necessary. All the funds will be used exclusively to further charitable purposes for high-need populations, according to the announcement.

"Ensuring that patients can access and afford life-saving medications is critical to our mission to improve healthcare quality and lower costs," Jay Want, executive director of the Peterson Center on Healthcare, said in a statement. "Civica Rx represents a truly groundbreaking, market-based approach to help ensure patients get the care they need at prices they can afford."

The effort takes aim at drug companies that have continued to increase prices for their products, even as some drugs have been on the market for years.

"The formation of CivicaRx is a direct challenge to generic drug companies who have sharply and unfairly raised prices on many off-patent drugs over the last several years," Shelley Lyford, president and CEO of the Gary and Mary West Foundation, said in a statement. "We all pay a price, and lower-income patients shoulder a particularly heavy burden. This intolerable situation has escalated to a public health crisis.”