Fed Up With Drug Companies, Hospitals Decide to Start Their Own
Written by Editor   
Wednesday, February 14, 2018 12:31 PM

Several major hospital systems, including Ascension, a Catholic system that is the nation’s largest nonprofit hospital group, plan to form a new nonprofit 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 now included in the group. Other hospitals are expected to join.

Group leaders 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.”  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.”

The idea is to directly challenge the host of industry players who have capitalized on certain markets, buying up monopolies of old, off-patent drugs and then sharply raising prices, stoking public outrage and prompting a series of Congressional hearings and federal investigations. The most notorious example is of 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.  We’re seeing an acceleration of both shortages and escalation of prices. There’s not been any effective push back on either of these.

The group's 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. 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.  An executive in charge of the Veterans Health Administration, said its pharmacy experts have consulted with the other systems about the project and is now working out the details of its possible involvement.

Representatives for the generic drug industry have noted that many of the most high-profile cases have involved old, off-patent drugs for which there has been no generic competition.  The trade group for generic manufacturers, the Association for Accessible Medicines, said its members generally welcome competition. “The whole generic industry is premised on competition, and that competition brings dramatic savings for patients,” said Allen Goldberg, a spokesman for the group.  But generic drug makers have also come under scrutiny. Last fall, a coalition of state attorneys general broadened a lawsuit over price fixing, accusing 18 companies of engaging in illegal practices involving 15 drugs.

Hospital executives felt they had little choice but to try to solve the problem themselves. The group’s 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.

Source:  https://www.nytimes.com/2018/01/18/health/drug-prices-hospitals.html