Hospitals and drug companies blame each other for the high prices. The Pharmaceutical Research and Manufacturers of America routinely highlights the degree to which hospitals mark up the price of drugs. It's drug companies, though, that are the subject of a federal antitrust lawsuit from attorneys general in almost every state accusing them of making illegal agreements to fix prices.
Fierens said this new operation will bring down prices simply by taking traditional drug companies out of the equation, replacing them with an outfit that ensures its profit margins are only high enough to sustain the business.
"What will be eliminated is the profiteering motive," he said.
The FDA has reformed policy to create more competition by expediting applications for generic drugs that have fewer than three competitors. The agency also published a list of sole-source drugs to spur applications and is working to clear the orphan drug backlog. The Association for Accessible Medicines, the trade group representing generic manufacturers, said competition is always good, but it's critical to ensure the right policies are in place to prevent the circumstances that lead to shortages in the first place.
Since the news was announced Jan. 18, several health systems have reached out to ask about partnering, executives said. The systems involved said they also plan to sell drugs to hospitals that aren't involved. While the VA will not fund the endeavor, it will offer "thought leadership" and may become a purchaser, Harrison said.
Cleveland Clinic is weighing whether it should partner with the new company or re-create the model itself, said Scott Knoer, the system's chief pharmacy officer. The Cleveland Clinic plans to expand its compounding facility to create IV products and other drugs in large batches as a reserve supply to be distributed throughout its system. Currently it only has approval to create the drugs to fill an immediate need amid a shortage.
"The more entries into the market the better; competition lowers prices. Hospitals are tired of unsustainable drug price increases and I like that this group is fighting back," Knoer said. Though, for the most part, generics usually don't have big price increases, he added.
Once the group commits to making specific products, prices on existing versions might plummet, Fierens predicted. If that happens, "society wins," and the business will honor its agreements. "If we happen to march down a road and magically the price drops by 300%, wonderful," he said. But that doesn't solve the supply issue, said Bob Ripley, Trinity's vice president and chief pharmacy officer. Trinity for the past several years has struggled to obtain even basic electrolytes that are critical to patients, like sodium bicarbonate and magnesium. Accessing injectable local anesthetics and opiate medications has also become a problem.
"It is about a stable, sustainable supply as much as it is about cost," he said.
Ascension CEO Anthony Tersigni said the group will look broadly at the drugs its patients are taking, then initially zero in on generics that have skyrocketed in price and those that are not available to patients.
"As pharmaceutical companies are increasing the age-old brand-name and generic-drug prices with little reason, we're going to be chipping away and saying, 'Where can we start?'" he said. "I suspect this will be wildly successful."