Hospital groups plan to make own drugs to battle cost, supply

TRENTON, N.J. — Several major hospital groups Thursday opened their own generic drug company to tackle chronic shortages and high prices.

The new company, Civica Rx, plans to start with 14 widely used hospital drugs long in short supply. The company isn’t disclosing the drugs’ names for competitive reasons, but they include a mix of generic pills, patches and injectable drugs for treating infections, pain and heart conditions, including drugs that are stocked on so-called crash carts used in emergencies, board Chairman Dan Liljenquist said.

“The mission of Civica is to make sure these drugs remain in the public domain, that they’re available and affordable to everyone,” he said.

Drug shortages have been widespread for more than a decade, particularly for inexpensive generic drugs, because of manufacturers consolidating, stopping production of low-profit medicines and having to fix manufacturing problems.

“Civica Rx will first seek to stabilize the supply of essential generic medications administered in hospitals,” the group said in a statement. “The initiative will also result in lower costs and more predictable supplies of essential generic medicines.”

Hospitals are particularly hard hit and frequently

● must scramble to find scarce medicines, often at huge price markups, or come up with workarounds that may not be as effective or safe for patients.

The number of drug shortages has ticked up recently, according to data compiled by the University of Utah Drug Information Service. About 224 drugs were experiencing shortages at the end of the second quarter, up from 174 a year earlier. Several injectable opioids used to treat pain have been in short supply; a number of those are made by Pfizer Inc.

The opening of Civica Rx could pose a challenge to companies such as Endo International PLC, which makes injectable medications given in hospitals. Other big generics

makers include Teva Pharmaceutical Industries Ltd. and Mylan NV.

“We expect a competitive response,” Liljenquist said. “We’re going to be entering markets that are not particularly competitive at the moment.”

The Food and Drug Administration has been working to get more generic drugs to market to help lower prices. FDA Commissioner Scott Gottlieb has said a lack of competition is a key reason for high drug costs.

Besides creating a reliable supply for its 500 hospitals, Civica aims to reduce drug prices by about 20 percent. The drugs will be sold to nonmember hospitals as well, at slightly higher prices, Liljenquist said.

The company, based in the Salt Lake City area, plans to make some of the generics itself and hire companies to

produce others, he said. It is aiming to get its first medicines on the market by midto late 2019.

Civica Rx needs about $200 million in funding to get started, and the current group of governing hospitals has contributed more than half that amount, Liljenquist said. The three foundations involved in the effort are each contributing $10 million, according to a separate statement. They are the Laura and John Arnold Foundation, the Peterson Center on Healthcare and the Gary and Mary West Foundation.

Other hospitals will contribute funds when they join, based on how many beds they have. The member hospitals also will commit to purchasing drugs from the venture.

Civica was founded and funded by three health foundations and seven hospital groups, among them Intermountain Healthcare, a 23-hospital system based in Salt Lake City where Liljenquist is chief strategy officer. Veterans Affairs, the American Hospital Association, HCA Healthcare Inc., Mayo Clinic and Catholic Health Initiatives also are participating.

Chief executive of the not-for-profit company will be Martin VanTrieste, the retired head of manufacturing quality at biotech drugmaker Amgen.

VanTrieste, who has agreed to run the venture without pay, previously worked at drugmakers including Abbott Laboratories and Bayer AG, according to his LinkedIn profile.