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Health Systems to Address Drug Costs With Formation of Nonprofit Generic Drug Company


Five health systems are coming together to form a new nonprofit generic drug company that will addressing rising generic drug costs and drug shortages at hospitals.

Generic drugs are supposed to help reduce the cost of healthcare by bringing down the price of medications, but that isn’t always the case. There have been recent instances where generic drugs, sometimes decades old, have received steep price increases.

A group of health systems are banding together to form their own nonprofit generic drug company to help address shortages and high-cost generics. Intermountain Healthcare is leading the collaboration with Ascension, SSM Health, and Trinity Health. The Department of Veterans Affairs is consulting with the group, but it has provided no funding. The 5 organizations represent more than 450 hospitals across the country.

“It’s an ambitious plan, but healthcare systems are in the best position to fix the problems in the generic drug market,” Marc Harrison, CEO and president of Intermountain Healthcare, said in a statement. “We witness, on a daily basis, how shortages of essential generic medications or egregious cost increases for those same drugs affect our patients. We are confident we can improve the situation for our patients by bringing much-needed competition to the generic drug market.”

The generic drug company is intended as an FDA-approved manufacturer. It will either directly manufacture drugs or sub-contract manufacturing. In addition to addressing rising costs of generics and providing more affordable options for patients, the company hopes to stabilize the supple of generic medications that have fallen into chronic shortage.

In April 2017, a study in JAMA1 highlighted the challenge of shortages of norepinephrine, a generic that is recommended as the first-line vasopressor for treatment of hypotension due to septic shock. The authors found that patients admitted to a hospital experiencing a shortage had higher in-patient mortality.

“The majority of drugs prone to shortage are, like norepinephrine, generic sterile injectable drugs with a short shelf life,” explained Julie M. Donohue, PhD, and Derek C. Angus, MD, MPH, in an accompanying editorial.2 They added that the shortage of norepinephrine in the study was caused by just 1 company reporting a manufacturing delay.

In November 2017, the American Hospital Association had written to FDA Commissioner Scott Gottlieb, MD, urging that he take action to resolve worsening shortages of small-volume parental solutions.

“We are concerned that the shortages of widely-used and critical products are quickly becoming a crisis and looming threat to the public’s health,” Thomas P. Nickels, executive vice president of government relations and public policy at AHA, wrote. “Therefore, we call on the FDA to both vigorously pursue strategies with the current manufacturers of these products and to seek out new suppliers in order to ameliorate the current shortage, as well as prevent such shortages from occurring in the future.”

The nonprofit generic drug company will be guided by an advisory committee that includes:

  • Madhu Balachandran, retired executive vice president of Global Operations, Amgen
  • Don Berwick, MD, president emeritus and senior fellow, Institute for Healthcare Improvement; former CMS administrator
  • Clayton Christensen, professor at the Harvard Business School and founder of Innosight
  • Bob Kerrey, managing director, Allen & Company; former Nebraska governor, US senator, and pharmacist
  • Martin VanTrieste, retired senior vice president and chief quality officer, Amgen

“For people in the United States, there is a dangerous gap today between the demand and supply of affordable prescription drugs,” said Richard J. Gilfillan, MD, CEO of Trinity Health. “If the only way to provide our communities with affordable drugs is to produce them ourselves, then that is what we will do. We look forward to more healthcare systems around the country joining this people-centered effort.”


1. Vail E, Gershengorn HB, Hua M, Walkey AJ, Rubenfeld G, Wunsch H. Association between US norepinephrine shortage and mortality among patients with septic shock. JAMA. 2017;317(14):1433—1442. doi:10.1001/jama.2017.2841.

2. Donohue JM, Angus DC. National shortages of generic sterile injectable drugs: norepinephrine as a case study of potential harm. JAMA. 2017;317(14):1415—1417. doi:10.1001/jama.2017.2826

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