February 8, 2018

Intermountain CEO: If 'profiteering' occurs in generic drug market, our new nonprofit will put 'it to death'

Daily Briefing

    In an interview with NEJM Catalyst's Leemore Dafny, Intermountain Healthcare President and CEO Marc Harrison explained his goals for a newly launched nonprofit that will supply generic drugs to hospitals—saying that it doesn't aim to become the "sole generic drug manufacturer," but rather to fight back against "profiteering" by a small number of existing generic drug companies.

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    Background

    Earlier this year, four of the nation's biggest hospital systems—Intermountain, Ascension, SSM Health, and Trinity Health—announced plans to form a nonprofit company that would supply certain generic drugs. The systems hope to challenge the pricing practices of drugmakers that have hiked the prices of older, off-patent medicines, as well as to stave off drug shortages—which have become increasingly common in recent years.

    Hospitals participating in the initiative said the new company will either work with third-party manufacturers or, with FDA approval, produce the drugs itself.

    In an interview with NEJM Catalyst, Harrison shares health systems' strategy for breaking into the generic drug market.

    'Necessity is the mother of invention'

    In the interview, Harrison said that launching a generic drug company "is not an ambition that Intermountain, nor I suspect the other systems, have had," but bad actors in the market forced the health systems "think creatively" to ensure they can continue to meet patients' needs.

    Harrison said the company's goal isn't to "be the sole generic drug manufacturer," but rather to "send messages in this market that if profiteering occurs, then there'll be a strong and organized response that puts it to death."

    Harrison compared the new company to that of a public utility that will place "public good first," while making "enough margin … to be sustainable and to reinvest in it." To do that, Harrison said the company will be "very selective about the parts of the market that we play in" and will leverage long-term contracts to save participating hospitals money.

    Each day more interested hospitals are "coming out of the woodwork," Harrison said. "We started with about 450 hospitals. We've added well over 100 hospitals in the last couple weeks, and I think we're going to top out at over a thousand hospitals."

    One goal for the new company, according to Harrison, is to "be able to sell generic drugs to the whole VA system." Harrison said the VA provided "a lot of help in thinking through the proposition," but noted that the health system has "very strict ... government purchasing regulations that they need to stay within," which could present a challenge.

    As far as timing goes, Harrison said he expects the company to "go dark for about a year" as things get set up. "You will (probably) hear from us in the first quarter of 2019," Harrison said (Harrison/Dafny, NEJM Catalyst, 2/1).

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