The US suffers disproportionately high health care costs, and one manifestation of that is inflated drug prices. Now, a number of American hospitals are saying enough is enough and are trying to change the game by making their own generic drugs.
The health care bodies taking action—which include the Mayo Clinic, SSM Health, and International Healthcare—together represent around 500 hospitals from across the U.S. Together, they have formed the non-profit drug development outfit called Civica Rx.
They first announced the effort earlier this year and since that time have earned a lot of interest from campaigners who say this is one of several important steps to tackling America’s drug price problem. In fact, organizations like the Laura and John Arnold Foundation, the Peterson Center on Healthcare and the Gary and Mary West Foundation have each promised $10 million to help Civica Rx make a lasting change in the drug market.
With the tagline “Serving patients is a privilege that comes with significant responsibilities,” it’s not hard to see why this non-profit is proving so enticing. While many drug companies claim to put patients first, the evidence for that has been sorely lacking, particularly in recent years.
Several major firms have bought up patents to old, but still used, drugs and then driven up the cost, sometimes by over 400 percent, bumping up insurance prices and choking drug availability. This forces doctors to look for off-label alternatives that then get bought up by drug companies and price hiked.
This vicious cycle has prompted Congressional investigations, perhaps most infamously in the case of “Pharma Bro” Martin Shkreli who is currently serving seven years in federal prison for defrauding hedge-fund investors as well as manipulating stocks at his former drug firm, Retroph.
But this new initiative aims to change that entirely.
This month, Civica Rx named Martin VanTrieste as its CEO, a big coup when we know a little about VanTrieste. A former chief quality officer at the multinational biopharmaceutical company, Amgen, VanTrieste has also worked for pharmaceutical companies like Bayer. When he retired two years ago, it seemed as though this was the end of VanTrieste’s involvement in the industry, but now he is set to return at Civica Rx, with one major difference: according to reports Mr VanTrieste will not be compensated for his role.
“We are creating a public asset with a mission to ensure that essential generic medications are accessible and affordable,” Mr VanTrieste said a press release. “The fact that a third of the country’s hospitals have either expressed interest or committed to participate with Civica Rx shows a great need for this initiative. This will improve the situation for patients by bringing much needed competition to the generic drug market. Civica Rx will first seek to stabilize the supply of essential generic medications administered in hospitals, many of which have fallen into chronic shortage situations, putting patients at risk.”
To that end, Civica Rx will be focusing first on 14 hospital-administered generic drugs that have fallen into chronic shortage. Civica Rx will be fully FDA compliant and aims to have its first round of drugs on the market by 2019.
The shortage in generics is a result of U.S. industry prices being so high. It means that in order to remain a player in the market, U.S. generic manufacturers have to price their drugs higher than their European and other regional counterparts. This leads to cost-cutting where only the most profitable generic drugs are viable.
There are other complicating factors, too, so this isn’t a case of all pharmaceutical companies being money-grabbing. Such factors can include things like resource shortages and production line disruption.
Pharmaceutical companies have been highly critical of the FDA for, they contend, slowing down production due to negative evaluations, but this is something that campaigners refute. They counter that the FDA is there to act as a safeguard, so it has a responsibility to halt production if it deems there is a shortfall in standards.
Civica Rx predicts that by pooling its resources across hospitals it will be able to slash the price of generics to a fraction of their current cost. This initiative could help to upend the pharmaceutical market by breaking away from the profits-at-patient-cost model under which many pharmaceutical companies seem to operate.
Of course, Civica Rx could also work alongside bigger pharmaceutical companies and provide a means of support by taking generics that are not profitable off the larger companies’s hands. This would allow larger firms to concentrate on what they do best, drug innovation, while allowing hospitals an uninterrupted supply of drugs they need for patient care.
Clearly, the U.S. drug market is not a healthy one, and while Civica Rx cannot fix the problem entirely, this initiative does at least appear to offer one solution, and in so doing start a much needed journey toward bringing the drug industry back to what it should be doing: serving patients, not investors.
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