Hospitals Launch Their Own Generic Drug Company

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Frustrated with chronic shortages and high costs, hospitals form their own generic drug company.

A consortium of four healthcare groups, citing frustration with ongoing shortages and high costs of generic medications, announced on Jan. 18, 2018 the formation of a not-for-profit generic drug company. The healthcare groups, Ascension, Intermountain Healthcare, SSM Health, and Trinity Health-working in consultation with the US Department of Veterans Affairs (VA)-represent more than 450 hospitals in the US.

The new company plans to be an FDA-approved manufacturer or will sub-contract manufacturing to contract manufacturing organizations and intends to provide patients “an affordable alternative to products from generic drug companies whose capricious and unfair pricing practices are damaging the generic drug market and hurting consumers,” according to a joint press statement.

Other goals of the new venture are to stabilize the supply of essential generic medications used in hospitals, many of which have been subject to chronic shortages, make drugs more affordable, and bring competition to the market for generic drugs. The founding members report that other health systems will soon join the initiative.

An advisory committee from pharma, business, and government includes Madhu Balachandran, retired executive vice president of global operations, Amgen; Don Berwick, president emeritus and senior fellow, Institute for Healthcare Improvement and former CMS administrator; Clayton Christensen, professor at the Harvard Business School and founder of Innosight; Bob Kerrey, managing director, Allen & Company and former Nebraska governor, US senator, and pharmacist; Martin VanTrieste, retired senior vice president and chief quality officer, Amgen; and senior-level leaders from the organizations founding the company.


Patient needs drive initiative

In the press statement announcing the new company, representatives of the founding organizations emphasized motivations for the initiative. “It’s an ambitious plan,” said Marc Harrison, president and CEO of Intermountain Healthcare, “but healthcare systems are in the best position to fix the problems in the generic drug market. We witness, on a daily basis, how shortages of essential generic medications or egregious cost increases for those same drugs affect our patients. We are confident we can improve the situation for our patients by bringing much needed competition to the generic drug market.”

“All Americans deserve access to high-quality, affordable care,” Laura Kaiser, president and CEO of SSM Health, said in the press statement. “The best way to control the rising cost of health care in the US is for payers, providers, and pharmaceutical companies to work together and share responsibility in making care affordable. Until that time, initiatives such as this will foster our ability to protect patients from drug shortages and price increases that limit their ability to access the care they need.”

"This initiative has the potential to greatly expand the availability and affordability of critically needed medications for millions of Americans, especially for people living in poverty and those most vulnerable,” said Anthony R. Tersigni, president and CEO of Ascension, in the press statement. “Rather than waiting and hoping for generic drug companies to address this need, we are taking this bold step on behalf of those we are privileged to serve. I'm pleased to see our respective systems come together along with the VA to ensure affordability and access to these essential medications."

“For people in the United States, there is a dangerous gap today between the demand and supply of affordable prescription drugs. If the only way to provide our communities with affordable drugs is to produce them ourselves, then that is what we will do,” Richard J. Gilfillan, CEO of Trinity Health, also said in the press statement. “We look forward to more healthcare systems around the country joining this people-centered effort.”

“As an organization which must have an affordable and stable supply of generic pharmaceuticals to fulfill its healthcare mission, the Department of Veterans Affairs looks forward to the value this new company will bring to healthcare in the United States and applauds Intermountain Healthcare, Trinity Health, SSM Health, and Ascension for this initiative,” Carolyn M. Clancy, executive in charge, Veterans Health Administration said in the joint statement. “Increasing generic drug manufacturing capacity will generate a more stable generic drug supply and will reduce the negative clinical impact of chronic drug shortages, including the impact on our nation’s veterans.”

Sources: AscensionIntermountain HealthcareSSM HealthTrinity Health