SALT LAKE CITY — To combat "crazy, arbitrary" drug prices and to correct an "aberration of the market" that's creating shortages of essential medications, a coalition of more than 100 health groups have announced it is launching its own generic drug company.
The not-for-profit company, called Civica Rx, will be based in the Salt Lake City area and is expected to go to market sometime in 2019 with 14 drugs in short supply that have seen skyrocketing prices, Utah health leaders announced during a news conference Thursday.
The 14 drugs were selected out of a list of 200, which company leaders said they hope to also tackle as Civica Rx gets to work.
Without a shareholder, the new drug company model is believed to be the first of its kind in the U.S., they said.
"As has been widely reported, certain generic drug manufacturers have been criticized for unwarranted shortages and crazy, arbitrary drug price increases, and creating artificial problems for patients," said Marc Harrison, Intermountain Healthcare's CEO and president.
Such "aberration of the market," Harrison said, has caused some generic drug costs to increase by more than 1,000 percent in just a few months for "seemingly no reason."
"We believe this is wrong," he said.
Citing competitive reasons, the new company's leaders declined to name which 14 drugs they'll be sending to the market next year.
"The reason we're not going to tell you is because that's a really competitive question, but what I will tell you is generic drug manufacturers who are honorable and do not create shortages and do not gouge prices have absolutely nothing to worry about, and they know who they are," Harrison said.
"Conversely, the folks who are perverting the system, they know exactly who they are and they should be very concerned."
While also declining to name specific drugs, Civica Rx board Chairman Dan Liljenquist said the drugs will include a mix of generic pills, patches and injectable drugs for treating infections, pain and heart conditions.
In recent years, several drugs have seen controversial markups, including the price hike of a more than 60-year-old anti-infection drug Daraprim, which Turing Pharmaceuticals raised from $13.50 a pill to $750 in 2015, the New York Times reported.
In late 2016, 20 states sued six generic drugmakers, including Teva Pharmaceuticals and Mylan and four smaller companies, accusing them of brazen price-fixing schemes. Teva, an Israeli drug maker, is a major manufacturer of generic drugs. Mylan faced controversy after it hiked prices on the EpiPen, a branded allergy treatment drug that has little competition.
Since the initiative to fight generic drug price gouging was announced in January, more than 120 health organizations representing about a third of America's hospitals have contacted Civica Rx and expressed interest in participating with the new company, Harrison said.
In addition to Intermountain Healthcare, Civica Rx members will include Catholic Health Initiatives, HCA Healthcare, Mayo Clinic, Providence St. Joseph Health, SSM Health and Trinity Health — organizations that represent about 500 hospitals in the U.S. The organizations will lead the Civica Rx board of directors and will provide initial funding for the company, Harrison said.
"We think we're the first of the kind of company in the country to have a model where there's no shareholder," Liljenquist said. "We are trying to create a societal asset that is really owned by the public at large."
Additionally, three philanthropies are joining the company as governing members: the Laura and John Arnold Foundation, the Peterson Center on Healthcare, and the Gary and Mary West Foundation.
The U.S. Department of Veterans Affairs will also work with Civica Rx to address needs, and other health systems participating will be announced later this year, Harrison said.
Civica Rx intends to be an FDA-approved manufacturer and will either directly manufacture generic drugs or subcontract manufacturing to "trusted" organizations, said Martin VanTriest, former chief quality officer for Amgen — one of the world's largest pharmaceutical companies — who was also named as CEO of Civica Rx.
VanTriest has agreed to lead the company without compensation, according to a news release issued Thursday.
Asked whether one company like Civica Rx will be enough to correct the market, Liljenquist said they believe it will.
"It only takes one generic company in a market if they are acting without a profit motive to lower the price and make it stable," he said.
Once it's up and running, Civica Rx is expected to eventually bring more than 100 jobs to Utah, according to Harrison.
It's not yet clear exactly where Civica Rx's building will be located, but VanTriest said it will be announced at a future date.
"This is a great day for all Utahns, all of Utah patients, and the United States," Harrison said. "What you see here today is a free market solution to a social ill that's been created by individuals who have perverted an industry. We aim to fix that."
Contributing: Associated Press