Civica Rx, the Blue Cross and Blue Shield Association and 18 independent Blue Cross and Blue Shield companies on Thursday announced the formation of a new Civica subsidiary with the goal of lowering prescription drug costs.
The Blue Cross and Blue Shield companies will contribute $55 million to the yet-unnamed spinoff, which will submit abbreviated new drug applications, or ANDAs, for select high-cost, single-source generic drugs dispensed at the pharmacy counter. The group plans to have its first generic medicines available by early 2022.
The new spinoff's mission to lower the cost of generic pharmacy drugs is notably different from Civica's, which is pursuing rights to manufacture generic drugs often used in hospitals that are subject to shortages and price spikes.
"Civica is already bringing value—in quality, supply and price—to the in-patient hospital market and with BCBS will expand that mission to reach individuals and families buying generic prescriptions in hospitals and pharmacies," said Dan Liljenquist, Civica board chairman.
The new subsidiary will build on Civica's innovative model that has made some physician-administered generic drugs available at more than 1,200 hospitals across the country, according to Maureen Sullivan, chief strategy and innovation officer at the Blue Cross and Blue Shield Association.
"We are solving a different business problem, but it is still showing how different private-sector stakeholders can come together to deliver lower-cost prescription drugs," Sullivan said.
Generally, more generic competition means lower drug costs. A FDA report on generic-drug competition for pharmacy drugs published in December 2019 found that the first generic on the market sparked a 39% reduction from the brand drug's average manufacturer price, while the fourth generic competitor resulted in a 79% lower price.
The partnership was born when Blue Shield of California CEO Paul Markovich had a conversation with Civica leadership in fall 2018 about adapting Civica's model to solve shortages to address affordability issues, Sullivan said.
No other founding members have joined the effort yet, but Civica General Counsel Jennifer Spalding said talks are ongoing.
Progressing toward ownership of ANDAs is a recent development and signals a new phase of Civica Rx's strategy.
The hospital-led not-for-profit on Jan. 16 announced a seven-year deal with Thermo Fisher Scientific to develop ANDAs for essential physician-administered drugs. The deal includes nine drugs that the group says were chosen by hospital-led panels, but Civica declined to name which drugs will be produced.
Spalding said owning ANDA rights will give Civica and its new subsidiary more control over the manufacturing process. Eventually, Civica aims to buy or build its own manufacturing facilities.