AHIP18: How Intermountain plans to fight pharmaceutical monopolies as a generic drugmaker

SAN DIEGO—As Dan Liljenquist watched former Turing Pharmaceuticals CEO Martin Shkreli raise a rarely-heard-of-drug more than 550%, he had the same thought as nearly everyone else in America: Is this really happening?

But unlike most Americans, Liljenquist happens to be in a position to do something about it.

The former Utah state senator and the vice president of Intermountain Healthcare’s Enterprise Initiative Office took a closer look at the generic drug market and found an industry rife with monopolies where competition had been slowly whittled down from 6 or 7 drugmakers to 1 or 2, effectively shutting off new entrants.

That created a scenario where Intermountain’s pharmacists were managing shortages on 190 essential generic medications, Liljenquist said during a presentation at the AHIP Institute & Expo in San Diego. That’s what prompted the health system to get into the drug-making business.

RELATED: Intermountain Healthcare CEO Marc Harrison: Hundreds of hospitals interested in nonprofit generic drug company

Intermountain announced the new venture in January and promptly received interest from more than 100 hospitals, Liljenquist said. In September, the system plans to announce the governing members of the new initiative, chosen from other health systems, he added.

The system-led nonprofit would as a “first-of-its-kind societal asset,” with its governing members acting as public service commissioners, he added. Using a crowd-funding approach with other health systems and insurers, the company could manufacturer low-cost generics and hold them in the public trust permanently.

With rising drug costs a primary focus for America’s Health Insurance Plans, CEO Matt Eyles says there’s interest from insurers to be a part of the venture. 

“[It’s] another great disruption, he said. “There’s no competition and suppliers have actually left. [Hospitals] are trying to have access to essential drugs to treat people who are in their facilities. I think it’s a really interesting and innovative idea and they’re stepping up and taking action to solve a problem.”

RELATED: Report—Brand-name drug prices grew 10 times faster than inflation over last 5 years

Traditional strategies—like fighting off pharmaceutical monopolies with scale on the purchasing side—didn’t seem to make a difference, according to Liljenquist. Even the Department of Veterans Affairs, the largest health system in the country, was facing the same problems with generic shortages and pricing.

“If there is only one producer, you’re a price-taker like anyone else,” Liljenquist said.

Shkreli isn’t an anomoly, he added, pointing to a drug called Syprine that treats a rare illness called Wilson’s Disease in which the liver is unable to process copper. After keeping that drug at roughly $1 dollar per day for decades, Merck sold it to Valent Pharmaceuticals. It now costs more than $200 per pill.

“These are patients who are literally subjected to lifelong servitude to for-profit companies who are willing to exploit their needs,” Liljenquist said.