Memorial Hermann to partner with new, non-profit generic drug company to lower costs



NEXT: See the best hospitals in Houston according to U.S. News. less Memorial Hermann Medical Plaza building at 6400 Fannin in the Texas Medical Center is seen in this file photo. Memorial Hermann Health System has partnered with a new generic drug company formed to combat "artificially high" pharmaceutical prices and ease chronic drug shortages, the drug company announced Monday. Memorial Hermann Medical Plaza building at 6400 Fannin in the Texas Medical Center is seen in this file photo. Memorial Hermann Health System has partnered with a new generic drug company formed to combat ... more Photo: LaSalle Investment Management Photo: LaSalle Investment Management Image 1 of / 12 Caption Close Memorial Hermann to partner with new, non-profit generic drug company to lower costs 1 / 12 Back to Gallery

Memorial Hermann Health System has partnered with a new generic drug company formed to combat "artificially high" pharmaceutical prices and ease chronic drug shortages, the drug company announced Monday.

Utah-based Civica Rx launched its generic drug initiative a year ago with strong Houston roots. The idea behind the venture is to allow hospital systems to "create their own priorities" in needed medications.

Such generic versions of the medications remain difficult to obtain because of price or availability or both, Heather Wall, chief commercial officer for Civica Rx, said in an interview on Monday.

"We're tackling the drugs that we've seen significant price increases over the past few years," she said.

Price hikes, often dramatic, can come from a lack of competition, especially among drugs that have fallen out of mass production. But Wall said that just because a drug is elusive does not mean it is not needed.

Typically there are about 200 drugs on shortage lists any given year.

When there is not enough of a certain drug in the supply chain, it can drive up the price to "artificially high" levels, which in turn forces providers and, ultimately, patients to pay more, Wall said.

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Memorial Hermann is one of 12 health systems across the country to enter partnerships with Civica Rx. The Houston-based system will be considered a founding member of what is predicted to be a growing network of hospitals nationwide, Wall said.

There are 750 U.S. hospitals now participating, the company said.

"Creating a consistent and stable supply of generic drugs not only ensures that we can continue delivering on our promise to always provide safe, high-quality care tailored to our patients' needs, but it also allows us to tackle the dramatic increases in U.S. health care costs that affect everyone. Our industry is consistently experiencing pharmaceutical shortages for commonly used drugs. These shortages result in health care organizations having to pay inflated pricing to secure appropriate supplies to adequately care for patients — pricing that ultimately gets passed along to the consumer," Chuck Stokes, CEO of Memorial Hermann Health System, said Monday in a statement.

Civica Rx will make generic versions of targeted drugs directly or subcontract the process, the company said. Currently it is scheduled to make 14 hospital-administered drugs by midyear, Wall said. The names of those drugs were not disclosed.

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The company was formed last January under the guidance of seven major hospital systems and three philanthropies to establish a framework and business model.

Among the philanthropies are the Houston-based Laura and John Arnold Foundation, which gave $1 million in seed money as well as access to $9 million more in loans, Wall said.

"The early success of Civica Rx gives you a sense of how much frustration there was within hospital systems in regards to accessing a steady and affordable supply of generic medications," said Dr. Mark Miller, vice president of health care for the Laura and John Arnold Foundation, in an email sent Monday. He called the burgeoning venture a "step in the right direction."

Also part of the original governing body are HCA Healthcare, which operates 15 hospitals in the Houston area, and Catholic Health Initiatives, which includes the St. Luke's health network in the region.

Memorial Hermann will now join them.

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In October, Memorial Hermann unveiled plans to merge with the Baylor Scott & White health network to form the largest nonprofit health care system in Texas and one of the largest in the nation. Wall said Monday it was not clear if the Baylor Scott & White system would also join with Civica Rx.

The collaboration between hospital and drug maker is part of a larger trend of unusual health care couplings to create access outside the usual boundaries. Take for instance, the plan announced last year that three business giants, Amazon, Berkshire Hathaway and JPMorgan Chase, would form an independent health care company for their U.S. employees.

More recently, the CVS drugstore chain received approval to buy Aetna, the nation's third-largest health insurance company, in a $69 billion deal that many say could transform the way millions of people get basic medical care.