Last September, I was privileged to host leaders of like-minded health care systems for a meeting organized by Intermountain Healthcare in Salt Lake City. At that meeting, we discussed a dire problem facing many of our patients: shortages — and skyrocketing costs — of certain generic drugs. For many patients, the availability of these drugs is a matter of life and death.
The problem is the more deplorable because, in many cases, it is artificially created by bad actors seeking to exploit inefficiencies in the market for generic drugs. The actions of a few have not only incurred censure and eroded public confidence in the pharmaceutical industry; they have placed the health and lives of patients at risk.
Our discussions led us to create a consortium of five health care systems representing 450 U.S. hospitals: Intermountain Healthcare, based in Salt Lake City; Missouri-based Ascension Health; St. Louis-based SSM Health; Michigan-based Trinity Health, and the Department of Veterans Affairs. Pursuing an idea originated at Intermountain, this group is developing a novel, free-market solution to the problem of shortages and price gouging.
Here’s the idea: We’re creating a new, not-for-profit company that will bring new competition to the generic drug market to ensure essential generic medications are both available and affordable. The new company will operate in the public interest.
This enterprise will either directly manufacture generic drugs or subcontract manufacturing to reputable contract manufacturing organizations. The initiative will result in lower costs and more predictable supplies of essential generic medicines, helping patients and their needs to come first in the generic drug marketplace.
Many of the well-publicized problems in the U.S. generic drug market can be attributed to a reduction in the number of suppliers, consolidation of production volumes and a concentration of market pricing power. These market factors are particularly problematic with many generic medications that physicians and hospitals rely on every day to take care of desperately ill patients.
Certain generic drug manufacturers have been widely criticized in recent years for unwarranted price increases and for creating artificial shortages of medications. Some drugs have increased in cost by more than 1,000 percent in just a few months for no apparent reason. Medications that cost $1 or less per dose to produce and distribute may be marked up to hundreds of dollars per dose.
Research into the actual costs of manufacturing and distributing generic drugs indicates that, in many instances, generic drug prices can be lowered to a fraction of their current levels, saving patients hundreds of millions of dollars each year.
Our approach has potential not only in the U.S. but in other countries as well. While many other nations have been more successful than the U.S. in negotiating discounts for generic drugs, they too face rising pharmaceutical costs — and shortages. Moreover, many developing nations struggle with counterfeit drugs and secure supply chains, and potentially they stand to benefit from a not-for-profit approach to the manufacture and distribution of pharmaceuticals.
The initiative is guided by a distinguished advisory board, including Don Berwick, M.D., president emeritus and senior fellow, Institute for Healthcare Improvement and former CMS administrator; Clayton Christensen, professor at the Harvard Business School and founder of Innosight; Bob Kerrey, managing director, Allen & Company, former Nebraska governor, U.S. senator and pharmacist; retired pharmaceutical executives, and senior leaders from the organizations founding the company.
I’m gratified but not surprised that the idea for the new company originated here in Utah with our dedicated caregivers at Intermountain. When Intermountain was founded in 1975 through a gift to the community from The Church of Jesus Christ of Latter-day Saints, church leaders made but one request of the fledgling health system: that we should always strive to be a model not-for-profit health system, doing our very best for those we serve.3 comments on this story
It’s a challenge we try to honor every day, and it has inspired generations of Intermountain caregivers to continually search for ways to innovate and improve. Because we’re not-for-profit, we’re able to put people and communities first.
This spirit of innovation and service is shared by the other organizations in our consortium and is the moving principle of the new not-for-profit company that promises to bring affordable generic drugs to those in need. It will be good for patients in Utah, in the U.S. and potentially around the world.