Last month, Intermountain Healthcare, Ascension, SSM Health, and Trinity Health, along with consultation provided by the US Dept. of Veteran Affairs (VA), formed a not for profit generic drug manufacturing company.  The company was formed in response to unwarranted shortages and high costs of some generic drugs.  The gravity of this event cannot be overstated for several reasons:

First and foremost, given how profitable drug companies are, removing profit from the equation will drastically reduce prices, obviously.  Both name brand and generic pharmaceutical manufacturers are driven by creating value for stake- and shareholders, not patients.  With an eye on profit, drug companies control supply and can decide on manufacturing levels that force premium brand adoption.  Often, companies are manufacturing both generic and name brand drugs.  Name brand drugs often provide much better margins.  So if you are a manufacturer, which drugs are you making? 

Pharmaceutical manufacturers enjoy the luxury of necessity.  They can push the envelope of affordability because consumers are at a disadvantage when they need drugs to live.  If a life saving drug is $100 or $10,000, chances are, the patient is going to buy it either way.  They might have to mortgage their house for the latter, but they will die if they do not.

Starting a manufacturing business whose mission is to provide drugs, at cost, changes the whole game and takes patient stewardship to a new level. To date, the most hospitals have done to combat high prices is join group purchasing organizations (GPOs) or have engaged in high stakes rebate and compliance contracts with their vendors.  The fact that several systems have come together to create a manufacturing company, as opposed to banning together to leverage volume for better pricing, shows just how serious they are about saving and just how serious the problem is for patients.

We’ve truly entered a new age in US Healthcare.  In a sense, the tables have turned.  Until now, pharmaceutical companies have “owned” US Healthcare. Now, hospitals will truly own a pharmaceutical company.  These IDNs are in it for one reason and it’s the right reason:  The patient.  Here at OIC, we have yet to stop applauding it.  Looks like the new kid in pharma is Here For Good.

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