Group seeks to lower costs of generics
Houston’s Arnold Foundation part of drug initiative
A group of major U.S. hospital systems and charities, including the Arnold Foundation in Houston, have established a not-forprofit drug company to combat soaring prices and shortages.
The company, Civica Rx, plans to produce generic drugs for which the market currently lacks competition, its founding organizers said Thursday. The current lack of competition causes exorbitant bills passed on to patients and a scarcity of medicines that hospitals scramble to manage on a daily basis.
“We are creating a public asset with a mission to ensure that essential generic medications are accessible and affordable,” Martin VanTrieste, Civica Rx’s CEO, said in a statement. “This will improve the situation for patients by bringing much needed competition to the generic drug market.”
The company’s audience now is only hospitals, initially about 500 represented by the seven participating systems. Significantly more will join the network later this year. But organizers say the long-term plan is to expand the initiative to regional markets, where it will benefit patients purch-
asing prescription drugs from pharmacies.
The company hopes to get its first medicines on the market by mid- to late 2019.
Civica Rx’s immediate focus will be 14 generic drugs routinely used in hospitals but long in short supply. The company isn’t disclosing the specific drugs because competitors could shut them out of the market by manipulating the price of such medications, but they reportedly include a mix of generic pills, patches and injectable drugs.
The participating hospital systems include four Catholic nonprofits — Catholic Health Initiatives, which has hospitals in the Houston area; Providence St. Joseph Health, which has hospitals in West Texas; SSM Health and Trinity Health; Intermountain Healthcare and the Mayo Clinic, both nonprofits; and for-profit HCA Healthcare, which has hospitals in the Houston area.
The Laura and John Arnold Foundation, the Peterson Center on Healthcare in New York and the Gary and the Mary West Foundation in southern California will serve as Civica Rx governing members, tasked with assuring the mission of the organization always remains the production of low-priced generic drugs.
The seven hospital systems and three charities are committing a total of $100 million to the initiative. Each is donating $1 million and loaning another $9 million, at below-market interest rates, that doesn’t have to be repaid for up to eight years, when the plan is for Civica Rx to be selfsustaining.
The foundations’ money may only used for charitable purposes, specifically programs and initiatives that ensure essential generic drugs are always available to high-need populations at affordable prices.
The initiative is a response to markets hurt by certain players buying up monopolies of old, offpatent drugs and then sharply raising prices. Martin Shkreli, the former hedge fund manager known as “Pharma Bro” who raised the price of a decades-old drug, Daraprim, from $13.50 a tablet to $750 a tablet in 2015, is the best-known example.
Shortages of generic drugs have been widespread at hospitals for more than a decade, typically caused by consolidations and reductions in the production of low-profit drugs. Manufacturing problems at any of the few remaining facilities also often exacerbate shortages.
“The current market for generics has resulted in shortages and high prices for certain essential drugs,” said Mark Miller, vice president of health care for the Arnold Foundation. “The objective of Civica is to enter the market, create an additional competition with the hope of correcting those shortages and putting downward pressure on prices.”
The concept of a hospital-led drug company was first announced in January. Since then, more than 120 health organizations, representing about a third of the nation’s hospitals, have contacted company organizers to express interest or commit to participating.
Many will join Civica Rx later this year, thus able to buy generics for about 20 percent less than the price at which existing manufacturers are currently selling them.
The Arnold Foundation’s $1 million gift is one grant out of about $50 million it has committed to lowering drug prices. The online health publication StatNews earlier this year called Arnold “the only major game in town on drug pricing at a time when other billionaires are flocking to fund politically charged work on hot-button issues like climate change and gun control.”
Civica Rx, organized as a Delaware non-stock, not-for-profit, will be headquartered in Utah. VanTrieste, who came out of retirement to take the CEO job, will not draw a salary.