Entry of generic drugs into the market should cause prices to drop. However, the generic industry has recently taken a page from the brand-name industry, engaging in price gouging and making it increasingly difficult to obtain critical medications, Marc Harrison, MD, the CEO of Salt Lake Intermountain Healthcare, wrote in an opinion piece published by STAT.
The stories of generic manufacturers price gouging are ingrained in everyone's head, Dr. Harrison wrote. For example, Turing Pharmaceuticals increased one tablet of a generic to treat a rare infection by 5,000 percent. That increase led of the Senate to question the company's former CEO "pharma bro" Martin Shkreli.
In another instance, the CEO of Nostrum Laboratories, a generic pharmaceutical company, argued there is a "moral requirement to make money when you can … to sell the product for the highest price."
The idea behind Civica Rx, a nonprofit company formed by several health systems that represent 800 U.S. hospitals, is to shake up the generic drug marketplace and challenge the price gouging system, Dr. Harrison wrote.
Civica Rx is led by Martin VanTrieste, the former chief quality officer for Amgen, who is serving in the role without compensation. Dr. Harrison serves as CEO of Intermountain Healthcare, one of the founding members of the nonprofit.
Civica Rx has "a different moral requirement" than Nostrum and other drug companies, Dr. Harrison wrote.
"Unlike for-profit companies, Civica Rx is a public asset whose mission is to ensure that essential generic medications are accessible and affordable. These are drugs that have emerged from the patent-protection period and are in the public domain. The company will work to ensure they remain that way," he said.
Further, there are two main reasons companies like Turing and Nostrum can hike prices, according to Dr. Harrison. First, if they have limited supplies of the drugs it is easier to raise the price. Second, profitable pharma companies can undercut anyone who'd consider investing in a competitor by drastically reducing the price of a drug for long enough to put the competitor out of business.
Civica Rx's model will disrupt this, Dr. Harrison argues.
Civica Rx is creating its own market. The participating institutions know how much of each medication they need and have data to back it up. The members of Civica Rx also know what constitutes a reasonable cost, so they can purchase medications at predetermined prices long into the future, which will ensure demand is met.
Additionally, any excess funds paid by the members will be invested back into the organization, instead of boosting the company's bottom line.
While the company will initially focus on 14 critical hospital-administered generic medications, within three to five years, Civica Rx expects to offer its member hospitals up to 100 generic medicines.
The first products are expected to hit the market this year.
Read the full piece here.