Seven of the nation’s major hospital groups, including Intermountain Health Care, and three prominent charitable foundations have joined forces to combat persistent shortages and rising prices of life-saving generic drugs.
This is good news, since the high cost and sometimes unreliable availability of essential medications are two of the primary reasons for the nation’s escalating health care costs.
Civica Rx, as the new organization is called, has initially identified 14 essential hospital-administered generic drugs which have fallen into chronic shortage situations and experienced skyrocketing price increases.
The company says it isn't disclosing the drugs' names for competitive reasons, but they include a mix of generic pills, patches and injectable drugs for treating infections, pain and heart conditions. It will, it says, "bring much needed competition to the generic drug market.”
The annual cost of health care in the United States is in excess of $3.3 trillion, making it one of the country's largest industries, equaling 17.9 percent of gross domestic product. The cost of health care is rising at two to three times the rate of inflation, faster than the average annual income. One of five Americans struggle to pay health care-related costs. Up to 2 million people have been affected by medical care bankruptcies.
The causes for ballooning costs are varied. Prices rise when demand outstrips supply, and health care is no different. The industry must also contend with increasing government regulation and taxation, and factors like an increase in lawsuits, which influence the cost of malpractice insurance for medical providers. Pharmaceutical manufacturers also cite the expense of bringing drugs to market. Little dispute remains that costs are out of control.
In announcing the venture, Intermountain Healthcare President and CEO Marc Harrison spoke of the criticism leveled at some drug manufacturers for "unwarranted shortages and crazy, arbitrary price increases" that create problems for patients and caregivers alike.
For example, the manufacturer of the anti-infection drug Daraprim raised the price from $60 per pill to more than $750 in 2015. Another example is the life-saving EpiPen, an auto injector widely used to treat allergy reactions. Its price has risen from $57 in 2007 to about $500 today.
It is these "aberrations of the market" that Civica Rx intends to help correct.
Board chairman Dan Liljenquist says, "The mission of Civica is to make sure (essential) drugs remain in the public domain, that they're available and affordable to everyone.”
The company, which is based in the Salt Lake City area, plans to make some of the generics itself and hire companies to produce others. It plans to have its first medicines available by mid to late 2019.
It remains to be seen whether one company like Civica Rx can make a difference and provide much needed relief for the burden of health care costs. But increasing competition to drive down costs and foster an environment of innovation is a basic principle of good economics, making this a necessary and welcome addition to Utah’s and the nation’s health care industry.