The rising cost of drugs has become one of the central issues in healthcare policy, and in the middle of that ongoing debate, a group of some of the country's largest health systems chose to launch a generic pharmaceutical company of their own.
Civica Rx, which launched formally in September but had been in the works for much of 2018, will initially be governed by seven health systems: Intermountain Healthcare, Trinity Health, Catholic Health Initiatives, Mayo Clinic, SSM Health, HCA Healthcare and Providence St. Joseph Health.
CEO Martin VanTrieste said that several key pieces of Civica's model have it on a path for significant disruption in the drug market status quo. For one, it's nonprofit, so it can provide drugs at the lowest fair cost to members and reinvest any revenue into expanding production and manufacturing capabilities.
The company is also member driven—in addition to the seven governing members, it also has founding and partner members—so the health systems involved are directing which products to make.
"Those products then, of course, most accurately represent the needs of our patients," he said.
Another piece to the puzzle, he said, is the structure of members' contracts. They sign up to buy 50% of their volume of a product from Civica and commit to that for between five and 10 years. So that both gives the manufacturing facilities a layer of reliability and also promotes market competition, as health systems can't contract solely with Civica, VanTrieste said.
Civica has yet to announce the products it will produce but has narrowed it down to about 14 options that its team believes are feasible in the next year. And just this week, it revealed that 12 new health systems had joined the company, bringing it to nearly 750 participating hospitals.
The big idea: Provide quality drugs that are available and affordable
Headquarters: Salt Lake City, Utah
CEO: Martin VanTrieste
Launch: Sept. 6
Annual revenue: Too early to say; depends on market
Funding: $160 million in capital
Employees: 11 but growing
Fierce insights from Civica Rx
FierceHealthcare: What is your best piece of advice for launching a healthcare company that challenges the status quo?
Martin VanTrieste: Doing this is not easy. It's really hard, and making pharmaceuticals is hard and complex from many different perspectives. So my advice to anybody is one, hire a very talented team of pharmaceutical professionals, and two, make sure you have passionate people on that team.
That's really the best advice I could give anybody that wants to start up a company.
FH: What is the failure or challenge you’ve learned the best lesson from?
MV: It's even harder than I thought it was going to be. I worked for big pharma companies my entire career, and so has my team, either big branded companies or big generic companies. Some people worked in some startup companies. The complexity of those smaller startups was nothing like what we're dealing with today.
It's really being open to realizing you don't know what you don't know. Surprises pop up every day. Working for a large pharmaceutical company, a lot of these challenges were overcome 50, 60, 70 years ago and everyone takes it for granted.
Everybody looks at each other and we scramble to learn. It's really to be open and not be afraid to ask for help.
FH: What is one change you predict in healthcare that people wouldn’t expect?
MV: You're going to see immense consolidation of the health system. I've read some articles that predict maybe there are four or five health systems nationally. I think that's going to be a big change for everyone in the ecosystem to adjust to.
I think the other big change you're going to see is the pricing models are all going to change. Only the people who really study this have even considered it yet; for example, now you have CAR T-cells and gene therapy, where those treatments cost $500,000 to $1 million, but they actually cure the patient and in the long run the system saves money. But it's a shock to the system when you have to pay it all at once.
I think you're going to see more models where you only pay if it works. What other product do we consume that if it's not right for you and it doesn't work, you have to pay for it?
I also think if you get five health systems in the country and Civica proves to be a successful model, you see more vertical integration by health systems, not just around generic drugs, but around a lot things.