For years, hospital executives have expressed frustration when essential drugs like heart medicines have become scarce or when prices have skyrocketed because investors manipulated the market.
Now, some of the country’s largest hospital systems are taking an aggressive step to combat the problem: They plan to go into the drug business themselves, in a move that appears to be the first on this scale.
“This is a shot across the bow of the bad guys,” said Dr. Marc Harrison, chief executive of Intermountain Healthcare, the non-profit Salt Lake City hospital group that is spearheading the effort. “We are not going to lay down. We are going to go ahead and try and fix it.”
The plan
While Intermountain executives would not name the drugs they intend to make, hospitals have long experienced shortages of drugs such as morphine or encountered sudden price increases for old, off-patent products such as the heart medicine Nitropress. Hospitals have also come under criticism for overcharging for their services, including for some drugs.
Several major hospital systems, including Ascension, a Catholic system that is the nation’s largest non-profit hospital group, plan to form a non-profit company that will provide a number of generic drugs to the hospitals. The Department of Veterans Affairs is also expressing interest in participating. In all, about 300 hospitals are included in the group. Other hospitals are expected to join.
Dr. Harrison said they planned to focus only on certain drugs. “There are individual places where there are problems,” he said. “We are not indicting an entire industry.”
Dr. Kevin A. Schulman, a professor of medicine at the Duke University School of Medicine who has studied the generic drug market and is advising the effort, said: “If they all agree to buy enough to sustain this effort, you will have a huge threat to people that are trying to manipulate the generic drug market. They will want to think twice.”
Taking on the players
The idea is to directly challenge industry players who have capitalised on certain markets, buying up monopolies of old, off-patent drugs and then raising prices. The most notorious example was Martin Shkreli, the former hedge fund manager who raised the price of a decades-old drug, Daraprim, to $750 a tablet in 2015, from $13.50.
Hospitals have also struggled to deal with shortages of hundreds of vital drugs over the past decade, ranging from injectable morphine to sodium bicarbonate (the medical form of baking soda), shortfalls that are exacerbated when only one or two manufacturers make the product.
Intermountain executives would not discuss many details of the project, citing fears that competitors could shut them out of the market by quickly dropping the price of the drugs in question, then raising them again later. They said they would focus on drugs whose prices have risen sharply or that have been in short supply.
“We’re going to have to hold that very close to our vest,” Dr. Harrison said. The company will either rely on third-party manufacturers or decide to make the drugs themselves.
The new company will initially focus on selling to hospitals, but officials said they may eventually expand to offer the products more broadly.
Intermountain executives said that they would seek approval to manufacture the products from the Food and Drug Administration, which has vowed to give priority to companies that want to make generics in markets for which there is little competition. NYT
