Hospital-owned drug company secures $100M and a CEO who will work for free

Seven major health systems, representing about 500 hospitals, have teamed up to form a nonprofit company named Civica Rx to manufacture their own generic medicines.

In January, Salt Lake City-based Intermountain Healthcare announced plans to form a nonprofit drug company to address the high costs and shortages of generic medications. The health system said Sept. 6 it is teaming up with the following six health systems to launch the company: Nashville, Tenn.-based HCA Healthcare; Rochester, Minn.-based Mayo Clinic; Englewood, Colo.-based Catholic Health Initiatives; St. Louis-based SSM Health; Livonia, Mich.-based Trinity Health; and Renton, Wash.-based Providence St. Joseph Health.

Civica Rx will be governed by the seven health systems and three philanthropies, which will provide much of the initial capitalization for the company. The Department of Veterans Affairs, the company said, "will also work in consultation with Civica Rx to address its particular needs."

The company will be backed with a total of $100 million, with each of the health systems and philanthropies making an upfront payment of $1 million and providing a line of credit for $9 million, Tim Lash, chief strategy officer of West Health and president of the West Health Policy Center, one of the philanthropies involved in the initiative, told Forbes.

The company's initial focus will be a group of 14 generic drugs that are administered in the hospital. Civica Rx will be an FDA-approved manufacturer and will either directly manufacture generic drugs or subcontract manufacturing to other organizations.

Civica Rx has selected Martin VanTrieste, former chief quality officer for Amgen, as CEO. Mr. VanTrieste, who has more than 35 years of experience in pharmaceuticals, has agreed to lead the company without compensation.

"We are creating a public asset with a mission to ensure that essential generic medications are accessible and affordable," Mr. VanTrieste said in a press release. "The fact that a third of the country's hospitals have either expressed interest or committed to participate with Civica Rx shows a great need for this initiative. This will improve the situation for patients by bringing much needed competition to the generic drug market."

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