January 24, 2020

Civica Rx, Blue Cross and Blue Shield to launch $55M new venture

Daily Briefing

    A group of 18 Blue Cross and Blue Shield health insurers on Thursday announced they are investing $55 million to create a subsidiary of Civica Rx that will develop generic drugs as an alternative to "high-cost" prescription medications.

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    The new venture

    The insurers will team up with Civica Rx, a nonprofit that was founded in 2018 by four of the nation's biggest hospital systems to supply member hospitals with lower-cost generic drugs. According to the Los Angeles Times, Civica Rx has 18 medications in production and has nearly 50 member health systems, representing about 30% of the nation's hospital beds. 

    Under the new initiative, the insurers and Civica will seek to bring lower cost generic drugs directly to consumers. To do so, the new subsidiary will acquire and develop abbreviated new drug applications (ANDAs) for 30 to 40 select generic drugs. The companies did not disclose which generic drugs the new subsidiary plans to develop, but said the list could include medications used by patients with chronic illnesses such as diabetes, multiple sclerosis, and some mental health conditions, according to the Times.

    The new subsidiary, according to the Times, will make the new generics by either contracting directly with manufacturers or making the drugs itself. In a release, the companies said the drugs will become available to Blue Cross members in 2022.

    In the meantime, the venture is working to recruit other health plans, pharmacies, and retailers, according to Blue Cross Blue Shield Association President Scott Serota.

    The venture's potential impact

    The goal of the unprecedented venture is to generate competition for pharmaceutical companies and influence the drugmakers to lower costs for generic drugs, especially ones that "have artificially high prices in outpatient settings," according to Civica Rx CEO Martin VanTrieste.

    "Our core challenge is making our product affordable, and one of the biggest barriers to that is getting pharmaceuticals to be affordable," said Blue Shield of California Chief Executive Paul Markovich. "We don't see the status quo getting us there."

    However, some experts are skeptical the effort will need to big industry changes. Ben Wakana, executive director of Patients for Affordable Drugs, said while the venture could help lower prices for consumers, it is unlikely the move will change the way the market operates. "It's like putting a Band-Aid on a bullet hole," he said. "What we really need is for the federal government to start negotiating with drug companies for lower-priced brand-name drugs. This is a first step, but just a first step," he said (Japsen, Forbes, 1/23; Owens, "Vitals," Axios, 1/23; Levey, Los Angeles Times, 1/22; Thomas, New York Times, 1/23).

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