A group of hospitals just picked a CEO to run their nonprofit generic drug company - and he's not getting paid to do it
- A group of hospitals have built a nonprofit generic drugmaker called Civica Rx.
- The company will be led by pharma veteran Martin VanTrieste who won't be compensated for his work.
- The hope is to make generic drugs that are in shortage or have artificially high prices based on what hospitals need.
Hospitals have a creative plan to tackle the high price and frequent shortages of generic drugs.
The nonprofit company, dubbed Civica Rx, was first announced in January, and has since gained a lot of attention from other hospitals around the US who are interested in being a part of the venture.
Civica said Thursday that it's named Martin VanTrieste as its CEO. VanTrieste is the former chief quality officer for Amgen who spent most of his career working at large pharma companies like Abbott and Bayer on sterile injectable drugs. He'd been in retirement for two years and had one condition to coming back: no salary. Instead, the funds that may have gone to his compensation will be used for other aspects of the company.
A slew of hospitals, including Catholic Health Initiatives, HCA Healthcare, Intermountain Healthcare, Mayo Clinic, and Providence St. Joseph Health will be involved in the initiative as governing members along with nonprofit organizations like the Laura and John Arnold Foundation. The Department of Veterans Affairs will also consult with Civica to make sure the agency's getting what it needs for patients.
To start, Civica will focus on making 14 drugs that are used in hospitals, typically injectable drugs. The company's priorities include making essential medicines that have been on the FDA drug shortage list, and taking on decades-old drugs that have artificially higher prices because they don't face any competition.
In those cases, companies made business choices that led to those shortages.
"There was a financial decision made behind that drug shortage," VanTrieste told Business Insider in an interview. By going the nonprofit route, ideally Civica can avoid the pressure of answering to investors.
For years, health systems have been on the hook for skyrocketing drug prices for injections or drugs delivered through IV solutions. And as of Thursday, there were 148 drugs currently facing shortages, according to the American Society of Health-System Pharmacists. Those shortages include everything from bags of saline solution to common antibiotics and a type of epidural used for pregnant women during childbirth.
Why hospitals are facing drug shortages and price hikes
There are a number of explanations for generic drug shortages. Some are related to manufacturing problems. In other cases, some of the companies making the drug simply stop making it, or a drug is only being produced by a single manufacturer, which can lead to price hikes.
And therein lies the problem: There are not enough companies making the drug to keep up with demand.
It's all part of a consolidation of the manufacturers that produce generic drugs.
US generic companies have had a harder time turning a profit on generic drugs while competing with companies outside the US that are able to make the same drugs at a cheaper cost. That's caused manufacturers to home in on certain generic drugs and discontinue others that don't make as much money.
If a generic manufacturer has a shortage, there's no easy solution - you can't just pass off the job to another company while the first fixes its problems, since getting approval to take on a new drug can take years. It also creates situations in which only one or two companies produce a certain drug, making it vulnerable to price increases.
Civica's first step is to work with manufacturing partners, VanTrieste said. The plan is to have some of the first products on the market by 2019.
As for whether Civica will be a temporary fix for the generic drug shortage problem or will continue to exist for the long-term, VanTrieste isn't sure. The company's priority, as for now, is stabilizing the generic drug market and keeping an eye out for big price increases.
"If people want to, they know we'll step in," he said. That could make the job of Civica fairly hands-off if its presence deters others from taking advantage of the system. But on the other hand, a more stable market could lead to generic companies to discontinue making certain drugs that they won't make much money on.
"If that happens, we could get very big," VanTrieste said.
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