Nonprofit Drug Company Aims To Fight Rising Prices; Some Jax Hospitals Are On Board

Sep 21, 2018

A new not-for-profit drug company, called Civica Rx, is looking to help combat drug shortages and rising prices with the help of health systems and hospitals across the nation, including several in Jacksonville.

It was announced in January that several major hospital systems throughout the nation would be launching the nonprofit. The venture’s name, structure, and leadership were announced on Sept. 6.

Drug shortages, which the Food and Drug Administration tracks, have been plaguing hospitals for years. It’s become so common place that the FDA created a task force in July to address the issue. On top of that, the Justice Department and 45 states accused generic drug makers of price fixing just last year.

“It really came to light based on the pain that hospital administrators and pharmacy directors were going through trying to find these essential medicines that are used in hospitals every day that have been in and off the drug shortage list that the FDA posts,” said Martin VanTrieste, President and CEO of Civica. “And because it’s been on and off the drug shortage list, prices have escalated to unfair and unreasonable prices. So a group of hospitals came together to see what could be done to fix the problem. And that was the birth of Civica.”

One health provider looking to get in on the ground floor is Jacksonville’s Baptist Health.

“We’ve shown great interest, and quite frankly, have had the conversation at the board level of the organization and are very committed to participating,” said CEO Hugh Greene . “We have not yet determined the level of our participation, but we want to at least be a partner organization. And of course, we’re joining with nearly half of the health systems, potentially, across the country.”

Civica offers hospitals and health systems three membership levels: governing, founding, and partnering. To become a member at any level, health systems are required to pay a one-time fee up front. Each level has a different membership fee.

Governing members sit on the board of directors. Civica currently has 10 governing members - three philanthropy organizations and seven hospital systems.

The hospital system governing members are Mayo Clinic, Intermountain Healthcare, Catholic Health Initiatives, Hospital Corporation of America (HCA), Providence St. Joseph Health, SSM Health and Trinity Health.

Mayo Clinic and HCA both have a strong presence in Jacksonville and Northeast Florida. Mayo Clinic Hospital in Jacksonville has 304 beds and 22 operating rooms. They offer more than 35 adult medical and surgical specialties.

HCA has three locations in Northeast Florida: one in Jacksonville (Memorial Hospital), one in Putnam County (Putnam Community Medical Center) and one in Orange Park (Orange Park Medical Center).

The three philanthropic organizations are the Laura and John Arnold Foundation, the Peterson Center on Healthcare and the Gary and Mary West Foundation. VanTrieste, who’s from Jacksonville says the company still has room for two governing members.

The organization has 15 founding members. They sit on key committees with the governing members to select the drugs that Civica will work on and they look at future medical trends.

Partnering members are considered part of the new company. VanTrieste said that more than 120 health systems have already called about joining Civica. “And those 120 health systems probably represent about one half of the hospitals in the country,” he said.

And, according to VanTrieste, “every member gets the same price for the product and the same access to the product. So we don’t treat any member class differently, in terms of the drugs. It’s just how the governance works within the company.”

Greene said Baptist Health is considering becoming a governing member, but conversations are still ongoing at the executive level and with the board of directors. But, according to Greene, everyone agrees that it’s “imperative” that Baptist Health participate in the project.

“This is a very important initiative, and really will make a difference,” Greene said. “This is really about supply and price transparency. And we face excessive shortages at times for many drugs. In fact, most pharmacies have a list of just tracking what it is we can’t obtain at a given time. Likewise we’ve seen price increases, even in this generic field, that are double digit, sometimes 50 percent over a period of time.”

According to Greene, a membership with Civica would be huge for Baptist Health patients.

“If you can’t get the medicine, that’s a problem for patients,” he said. “If the medicines continue to go up in price, that ultimately affects affordability. So on both levels it has a very positive effect on patient care, and most importantly getting patients the medicine they need at an affordable price.”

And Baptist Health’s doctors would be thrilled to hear the news as well.

“Well it’s a great frustration for physicians to prescribe and find out that a particular drug, even though it’s generic, is unavailable,” said Greene. “Many times, they are unaware of the price of the drug that they’re ordering and learn, later, what this costs and are both disappointed and sometimes appalled by the price increases that have been imposed.”

Greene said the decision to commit to Civica doesn’t have anything to do with competition.

“I would hope that every health system in our community would participate. Because we really are needing to address a problem that is nationwide. So I don’t see this as a competitive participation on our part, to somehow single us out,” he said. “I would encourage all of the health systems in our community, and in our state, to participate.”

Once a health system like Baptist Health has become a member, Civica will start bringing them drug candidates. The system will then have the opportunity to opt in or out of purchasing that individual drug.

“If they opt in, we’re asking the hospital to provide us a long term contract, up to 10 years. At least buying 50 percent of their volume for that particular product,” said VanTrieste. “And if they don’t buy the product, they’ll pay for it anyway. It’ll be a take-or-pay decision.” A take-or-pay agreement requires buyers to pay even if they later decide they don’t want the product.

And those long-term contracts require the hospitals to buy the medications at fixed prices, even if another generic company drops its prices lower.

Civica then takes those guarantees and passes them onto their manufacturers - long term contracts, long-term significant volume and take-or-pay agreements. “As a manufacturer, there’s nothing better that they like to hear,” VanTrieste said. “They can plan their supply chain. They can plan capacity increases. They know what to tell their suppliers to produce. So the stability of the supply chain is key to this.”

Civica plans to start manufacturing and distributing 14 generic drugs sometime in 2019, but the names of those drugs are not going to be made public any time soon.

“We’re looking at 200 different drugs that have either been on and off the drug shortage list or have had unfair price increases,” said VanTrieste. “The reason we’re not providing the names of the drugs, is because if the competition knows what we’re going to do they could easily lower the price, dump into the market and try to prevent this from even starting.”

For similar reasons, the names of Civica’s manufacturers aren’t being released either.

“We’re working with several trusted manufacturers,” VanTrieste said. “They’re experienced. They’re already licensed by the FDA. They know how to do this. I don’t want to name them, also, because a competitor could then go buy that manufacturer and then lock us out.”

VanTrieste said Civica’s model for distribution could also be a bit disruptive. “We will have the products manufactured with a trusted manufacturer,” he said. “They will then provide us the product. We take ownership of the product right away. And we, then, will distribute directly to the hospital systems.”

According to VanTrieste, the goal of Civica is to make sure people have access to critical medicines. “We’re hoping that we can stabilize the marketplace for these essential medicines in hospitals. And if we’re successful and other competitors follow us, and we become, actually, a policing mechanism in the marketplace, that’s a good outcome for us. We don’t have to be the biggest generic drug maker in the world.”

Photo used under Creative Commons license.

Brendan Rivers can be reached at brivers@wjct.org, 904-358-6396 or on Twitter at @BrendanRivers.