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The exciting new idea hospitals have to bring down drug prices

A piece of good health care news.

Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

Let’s talk about an unambiguously interesting, promising, and maybe even downright good piece of health care news you might have missed: A group of hospitals is banding together to produce cheap generic drugs to fight off egregious price hikes and drug shortages.

The not-for-profit venture is called Civica Rx, and the company announced itself last month. A collection of 22 hospitals in the Salt Lake City area called Intermountain Healthcare, the Mayo Clinic, the for-profit health care facilities company HCA Healthcare, and some philanthropic foundations are pulling together to form the firm.

Their mission is remarkably simple: For generic drugs that are in short supply or whose prices have risen dramatically (or both), the company will start producing its own, cheaper alternative. It is, in a sense, a drug maker that exists exclusively to combat high prices or drug shortages — it does not sound like researching and developing new drugs is part of their plan.

Civica Rx “represents a realistic means of addressing the problem of small market generic pricing,” Craig Garthwaite, a health economics professor at Northwestern University’s Kellogg School of Management, told me.

As NPR reported last month, IV bags, injections for various anemic disorders, and a tissue-numbing agent — which seems kind of important at a hospital! — are some of the generic medicines that have seen shortages recently.

According to the FDA’s database, more than 100 generic drugs are currently officially classified as being in short supply. That list includes drugs that treat Parkinson’s disease, chemotherapy drugs, and a tablet for chronic obstructive pulmonary disease.

To fully appreciate the scope of the generic drug pricing problem, remember that the Justice Department and 45 states are currently in court accusing generic drug makers of price fixing and costing Americans more than $1 billion for their medicines. We spend a lot of time on new brand-name drugs, but some of the most egregious examples of price hikes have been for generic drugs.

That’s the problem Civica Rx wants to solve. The company expects to start applying for FDA approval in 2019, and it is setting its sights on 14 yet-to-be-named drugs to start with. Manufacturing drugs — even generics that are no longer protected by patent — and getting FDA approval is no simple thing. But experts are cautiously optimistic.

”For a set of high-priced small molecule generics in particular, this strategy could be very useful in bringing down prices,” Rachel Sachs, a law professor who studies drug prices at Washington University in St. Louis, told me by email. “However, these companies will face many challenges on their path to market and it will be interesting to see the choices they make.”

That felt good, didn’t it? Let’s hear some more good news, bullet-point style. Thanks for the tweets and emails:

  • This is fresh! Johns Hopkins announced Sunday it would be naming a new research facility after Henrietta Lacks, the black woman whose cells helped change medicine, but whose family for years had no idea about their relative’s medical legacy and received no financial benefit.
  • Rena Conti at Boston University is excited about Pillpack (and she just saw the first ad for Amazon’s latest big health care move) and BlueChew, an in-home prescription and consulting firm focused on sexual performance drugs. “These guys are the first wave of direct to consumer healthcare delivery.”
  • We should stop to appreciate the remarkable progress being made in immunotherapy treatments for cancer. Vox’s Julia Belluz has the lateston this year’s Nobel Prize winners.
  • Even politicians can have a good moment. Earlier this year, New Jersey passed a law to combat balance billing (when patients get a surprise bill for out-of-network care their insurance company won’t pay). And now, as part of its Federal Aviation Administration reauthorization bill, Congress is taking steps to bring cost transparency to air ambulances. Modern Healthcare’s Susannah Luthi has the full story (and a reference to a $600,000 medical flight bill!).

This story appears in VoxCare, a newsletter from Vox on the latest twists and turns in America’s health care debate. Sign up to get VoxCare in your inbox along with more health care stats and news.

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