Shortages and soaring generic prices prompt US hospitals to form not-for-profit drug business

By Flora Southey contact

- Last updated on GMT

GettyImages/Gajus
GettyImages/Gajus

Related tags: Food and drug administration, Pharmaceutical industry, Generic drug

Drug shortages and rising medicine prices in the US have driven a group of hospitals to form a not-for-profit generic drug manufacturing firm.

The five associations – which represent more than 450 hospitals in the US – include Intermountain Healthcare, Ascension, SSM Health, and Trinity Health, in consultation with the US Department of Veterans Affairs (VA).

According to Intermountain, a decrease in the number of suppliers and consolidation of production volumes are major factors influencing high pricing and medicine shortages in the US generic drug market.

“The new initiative will result in lower costs and more predictable supplies of essential generic medicines, helping ensure that patients and their needs come first in the generic drug marketplace,” ​said the hospital association.

“The [as yet unnamed] company will also seek to stabilise the supply of essential generic medications administered in hospitals, many of which have fallen into chronic shortage,” ​it added.

SSM Health CEO Laura Kaiser agreed the best way to control the rising cost of health care in the US is for payers, providers and pharmaceutical companies to work together.

“Until that time, initiatives such as this will foster our ability to protect patients from drug shortages and price increases that limit their ability to access the care they need,” ​she added.

In-house or outsourced?

VP Dan Liljenquist told us the associations will consider what high-capacity contract manufacturing organisation (CMO) capacity is available and where, when determining whether the not-for-profit will make generic drugs in-house, or outsource manufacturing to a third party

Liljenquist does not plan to negotiate reduced rates with CMOs, despite the firm’s not-for-profit status.  

“That said, we will negotiate volume discounts based on the amount of business we can bring to the CMO,” ​he told us.

Gil Roth, President of the Pharma & Biopharma Outsourcing Association, a non-profit trade association representing contract manufacturers and other service providers, commented, "Our CMO/CDMO members are ready to work with license-holders and license applicants to bring quality, cost-effective medicines to patients."

Challenges?

Drug shortages and pricing are complex issues, said Roth.

“I believe the economics of these two different situations – ‘market-failure’ drug shortages for ANDAs [abbreviated new drug application], and single-source price spikes for products with no approved ANDAs – are perhaps even more complex than building a CMC [chemistry, manufacturing, and controls] operation from scratch,” ​he told us.

While Liljenquist admitted, “It will take us some time to get FDA approved generic medications to market,” ​he does not “anticipate significant hurdles establishing or capitalising the business.”

The hospital groups will convene in early February 2018, to meet with an Advisory Committee made up of experts from the pharmaceutical industry, business and government.

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