Hospitals plan to launch drug manufacturing business

A group of hospitals are stepping into the drug manufacturing business as a way to combat high drug prices and drug shortages. Intermountain Healthcare, a large non-profit hospital system, is leading the initiative, along with Ascension and Trinity Health, two other non-profit hospital systems. Reed Abelson and Katie Thomas at The New York Times report that the VA may also join with them. The question is whether this David of hospitals can succeed in its battle against the Goliath of generic drug manufacturers?

To date, there are 300 hospitals that are working together on this initiative, and more hospitals are likely to join in. They have formed a new non-profit for the express purpose of manufacturing essential and low-cost drugs. They are not yet disclosing which specific drugs they will manufacture for fear that competitors will try to undersell them, quickly put them out of business and then raise prices.

These big non-profit hospitals see a pressing need for more competition in the generic drug market. Hospitals need certain drugs that have become hard to get, including injectable morphine, saline fluids and sodium bicarbonate. And, they also are paying exorbitant prices for some drugs that should cost very little.

The hospitals have not decided whether they will manufacture the drugs themselves or hire a third-party to manufacture the drugs on their behalf. The drugs they manufacture will be exclusively for use by the hospitals at the outset. The Veterans Administration, which has the lowest-priced drugs in the US, is interested in joining the group because it too struggles with securing certain drugs.

Daraprim, Nitropress, Isuprel and doxycycline hyclate are four of myriad generic drugs that have seen steep price increases in the last several years. Even when drugs go off patent, some generic drug manufacturers have seized on opportunities to make huge profits by raising prices sky high. And, in the fall of 2017, a group of state attorneys general sued 18 drug companies for price fixing with regard to 15 drugs.

Advisors to the project include former Nebraska Senator, Bob Kerrey and former head of the Centers for Medicare and Medicaid Services (CMS) Dr. Donald Berwick. StatNews reports that Dr. Peter Bach, of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, and Stephen Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota, are also advisors.

The question now is whether the FDA will give this hospital group’s request to manufacture drugs the priority the FDA has said it would give companies manufacturing generics. The group plans to begin manufacturing in early 2019.

Just Care has joined with Daily Kos, Right Care Alliance and several other organizations in a campaign to move Congress to rein in drug prices. If you want Congress to rein in drug prices, please sign the petition here.

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