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Hospitals creating a company to make cheap generic drugs

Major not-for-profit hospital groups are creating their own drug-making companies to fight drug shortages and high medicine prices.

Once-cheap generic drugs have rocketed in price in the last few years, and those that haven’t are running in increasingly short stock.  

It means hospitals, which rely heavily on generic injectable medicines, are being forced to spend much more money on drugs, or offer less effective ones, while delegating staff to spend valuable work hours searching for good alternatives.  

Now, four hospital groups – Intermountain Health, Ascension and two Catholic health systems, Trinity Health and SSM Health, plus the VA health system – are backing the not-for-profit company model in a desperate bid to change the status quo.

Several major not-for-profit hospital groups are trying their own solution to drug shortages and high drug prices: creating a company to make cheaper generic drugs

Together, the five groups include more than 450 hospitals, nearly one-tenth of U.S. hospitals. 

They also run numerous clinics, nursing homes, doctors’ offices and other medical facilities, along with hospice and home care programs and an insurance plan. More health systems are expected to join soon.

The goal is to counter the consolidation of generic drugmakers that’s caused shortages for more than a decade and allowed some companies to raise prices many times over what some generics once cost. Those include antibiotics, morphine, heart drugs and others.

‘It’s an ambitious plan,’ Intermountain Healthcare CEO Dr. Marc Harrison said in a statement. 

He said health care systems ‘are in the best position to fix the problems in the generic drug market. We witness, on a daily basis, how shortages of essential generic medication or egregious cost increases for those same drugs affect our patients.’

Generic drugs can be manufactured very inexpensively, offering the hospital groups the chance to save hundreds of millions of dollars annually. 

The new company will either contract manufacturing to an existing company or get Food and Drug Administration approval to make medicines itself.

The company will be guided by an advisory board of high-profile experts from government, the pharmaceutical industry and Harvard Business School. 

Members include former Centers for Medicare and Medicaid Services administrator Dr Don Berwick and Bob Kerrey, a pharmacist and former governor and senator from Nebraska.

Ascension, based in St Louis, is the biggest US non-profit health system, with 141 hospitals in 22 states. 

North-Dakota-based Trinity Health operates 93 hospitals in 22 states. St. Louis-based SSM Health runs 24 hospitals in four Midwestern states. 

Salt Lake City-based Intermountain has 22 hospitals in Utah and Idaho. 

The Veterans Administration runs the country’s largest integrated health system, with hospitals across the U.S. and its territories.