A Growing Number of Hospitals Are Banding Together to Take on Big Pharma

In the ongoing debate over the cost of healthcare, rising prices for prescription drugs have been a major concern. Horror stories abound, and they’re not just anecdotal: A recent study of more than 28,000 drug codes from 2008 to 2016 found that prices are rising faster than inflation.

That means it’s not costs that are increasing, so much as it’s drug-company profits. Injectable drugs, for example, increased 15 percent in price over that period. That includes life-saving treatments such as insulin; the price hikes have increased the extremely dangerous practice of “insulin rationing.” (The government shutdown has also forced at least one federal worker to do the same while she waits for her paycheck.)

One way of fighting price increases is by producing competitive generic drugs. Last year, a consortium of hospitals announced a joint effort to do just that. The nonprofit, Civica Rx, was found to “ensure that essential generic medications are accessible and affordable,” according to its mission statement. The founding members including heavy hitters such as the Mayo Clinic, Catholic Health Initiatives, and HCA Healthcare, and last week it announced 12 new health systems had come onboard. That adds another 250 hospitals to the project, which now includes about 750 nationwide.

The idea behind Civica is that by producing their own drugs, hospitals will not only save money, but will be able to stabilize supply, alleviating drug shortages. Right now, hospitals—and by extension, patients—are at the mercy of drug companies, who may underestimate demand, or raise prices so much that hospitals can’t afford to hold onto the drugs they need.

Civica aims to create a system in which that won’t be a worry; prices will be transparent, based on manufacturing costs, with long-term contracts to eliminate surprise increases. Member hospitals will know exactly what it costs to make the drugs, and all of them will pay the same price. On the other side of the equation, Civica can quickly respond to demand from member hospitals.

To begin, Civica plans to focus on 14 drugs (though for competitive reasons it’s not yet revealing which ones), with the first drugs shipping this year. (The member health systems will decide how to expand that list in the future.) It’s looking to produce the drugs in the United States, which would shorten supply chains and make it easier to keep hospitals stocked in a timely way.

All of which might sound extremely complicated. The bottom line, though, is that hospitals are looking to wrest away some control of drug manufacturing from pharma companies that have often failed to have patients’ best interests at heart. It’s still early to say whether Civica will succeed in bringing down prices and stabilizing supply, but it’s certainly gained some powerful allies in its mission.

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