Another Innovative Strategy: Create Your Own Drug Company

Salt Lake City-based Intermountain Healthcare is leading a group of hospitals to create a not-for-profit generic drug company to address drug shortages and the high costs of off-patent drugs. Other partners in the collaborative include Ascension, SSM Health, Trinity Health, and the U.S. Department of Veterans Affairs.

Dan Liljenquist, vice president of the Enterprise Initiative Office at Intermountain Healthcare, is leading the initiative. He first noticed the problem as a Utah state senator serving on committees that oversaw Medicaid spending and the budget. “Medicaid costs were growing out of control, and one of the disturbing areas was generic pharmaceutical costs,” he says.

Liljenquist joined Intermountain shortly after leaving the legislature and has been troubled by the continued rise of generic drug prices, particularly for products hospitals rely on every day to provide basic health care. “These are drugs that were developed in the 50s, 60s, and 70s that are having shortage situations and correspondingly high price hikes,” he says.

Eighteen months ago, he started to investigate the economics of drug shortages. “Some of these shortages were clearly designed to extract the maximum price from customers,” he says. His idea was to form a not-for-profit generic drug company with an overseeing board that would act like a public utility.

The new company’s primary goal is to help patients by eliminating drug shortages. “You talk to chief pharmacy officers, and they are spending the vast majority of their time trying to find drugs that should be available in a stable quantity,” Liljenquist says. Not only is this risky for patients, it is also highly inefficient.

Another goal is better pricing on off-patent drugs by creating a more stable supply. “Once those drugs are in the public domain, they should not be exploited by other companies,” he says. “Our goal is to make those drugs available and affordable, and  put them back in the public domain within reach of regular people. We know it is ambitious, but we are excited about it.”

Within the first two weeks of announcing the new company in January, more than 30 hospitals of all types and sizes contacted Intermountain to learn more about the initiative. Leaders at Intermountain hosted the company’s first advisory meeting in February to determine governance. They expect to launch the company by mid-2018. More partners will be announced later this year, and the company could produce drugs as early as next year.

What the new company will not do is challenge patents of brand drugs currently on the market. The company also has no plans to move into the costly biologics space or focus on new drug innovation.

See related article: Leading Hospitals Turn to Advanced Strategies for Pharmacy Savings