A consortium made up of 300 hospitals – and counting – are taking a bold step to address high drug prices and shortages of essential medicines: they’re cutting out the pharma middleman and starting their own non-profit generic drug company.
The move is a first of its kind, according to a report from The New York Times. Intermountain Healthcare, a non-profit Salt Lake City, Utah-based hospital is leading the charge.
“This is a shot across the bow of the bad guys,” CEO Dr. Marc Harrison told the news outlet. “We’re not going to lay down. We are going to go ahead and try and fix it.”
It’s not yet clear exactly which drugs the new company will make and supply to hospitals, but hospital executives have long expressed their concern and anger over shortages for drugs like morphine.
Major hospital systems are expected to join the effort, including the nation’s largest non-profit hospital group, Ascension. The Dept. of Veterans Affairs is also slated to participate.
“VA is joining four other major health care systems to form a nonprofit generic drug company. The goal is to bypass current drug manufacturers, blamed for arbitrary price increases and artificial shortages of vital medications,” the group posted to Twitter this morning.
The decision to move into pharma’s territory is rooted in frustration with an industry that is infamous for buying up monopolies of old drugs and hiking the prices. The drug industry’s pricing problem came to the forefront of public discussion in 2015, after Turing Pharmaceuticals raised the price of its malaria drug, Daraprim, from $13.50 a pill to $750 apiece.
Harrison said that the consortium will focus only on particular drugs that have been historically pricey or hard to come by.
“There are individual places where there are problems,” he told the NYT. “We are not indicting an entire industry.”
The lobbying group for generic drug manufacturers told the news outlet that companies welcome competition, saying that “competition brings dramatic savings for patients.”
But Kevin Schulman, a professor at the Duke University School of Medicine and an advisor to the hospital consortium, told The Times that if enough hospitals take part in the effort and buy their drugs from the newly-formed company, it could have a profound impact on the generics market.
“If they all agree to buy enough to sustain this effort, you will have a huge threat to people that are trying to manipulate the generic drug market,” he said. “They will want to think twice.”