Will Intermountain's new drug venture actually pay off? Here's what 750 industry stakeholders think.

Health care providers are optimistic and ready to purchase generic drugs from a health system-led nonprofit designed to address rising drug prices and shortages, according to a recent survey from Reaction Data, Modern Healthcare reports.  

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Background

In January, four of the nation's biggest hospital systems—Intermountain Healthcare, 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 the drug shortages that 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.

Survey findings

To assess the health care industry's attitude toward the new nonprofit, researchers from Reaction Data surveyed a total of:

  • 605 representatives from health care provider industry;
  • 91 representatives from the pharmaceutical industry; and
  • 53 representatives from the health care payer industry.

The researchers found that 60% of respondents from the health care provider industry did not know about the nonprofit—but even so, many of them still believed such a venture would be successful. According to the survey, 90% of respondents from the health care provider industry expressed their willingness to become a customer of the nonprofit.

Overall, 80% of respondents from the health care provider, payer, and pharmaceutical industries said they are either optimistic or cautiously hopeful the new venture will change the status quo in the health care industry. However, many respondents still expressed skepticism that the nonprofit can overcome the financial and logistical challenges involved in entering and disrupting the drug industry.

Representatives from the pharmaceutical industry said they are not concerned about the nonprofit's entry in the drug industry, with 72% of such respondents saying they do not view the nonprofit as a threat.

According to the survey, 38% of respondents from the health care payer industry and 29% of respondents from the pharmaceutical industry expect the venture will be successful. Among health care industry payers, 48% of respondents said the nonprofit will have a positive effect on the health care industry, while another 48% of respondents said it will have a neutral effect.

According to the survey, a majority of respondents representing providers said the nonprofit will lead other hospitals to form similar drug ventures—but pharmaceutical industry respondents were more skeptical. In particular, the researchers found 65% of respondents representing providers said they see others following suit, compared with 48% of respondents representing the pharmaceutical industry.

Comments

Graham Triggs, director of professional services at Reaction Data, said the pharmaceutical supply chain faces potential disruption as the health care industry continues to grapple with rising drug prices and drug shortages. He said, "This is going to take a lot of focus and money to get something like this off the ground. But if they can, dozens of providers are saying they will follow suit, either by teaming up or doing something on their own."

Triggs said respondents representing the drug industry thought the health systems forming the nonprofit "don't know what they are getting into," adding, "Whether they truly feel threatened or not is anyone's guess, but they are saying they are confident that [the nonprofit is not] a huge threat."

James Augustine, an emergency physician at Mercy Health, said, "This effort could teach others how to make a market for themselves and put pressure on the rest of the industry. Ideally, this re-energizes the industry to be more responsible in pricing behavior" (Bean, Becker's Hospital Review, 5/24; Kacik, Modern Healthcare, 5/24).

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