Hospitals Forming New Generic Labeler

Intermountain Healthcare along with several other hospitals announced the creation of a not-for-profit generic drug labeler.  This new entity intends to sell generic pharmaceuticals for use in hospitals where supply availability has been challenging and costs have risen.  The U.S. Department of Veterans Affairs is also involved but has provided no financial support.  Hundreds of hospital systems have inquired about the new venture and over one thousand hospital systems may eventually participate.

The not-for-profit labeler targets the first quarter of 2019 to begin supplying product.  The new venture plans to deliver up to 20 products.  The hospitals expect to save money by signing long term agreements.

Marc Harrison, MD, President and Chief Executive Officer of Intermountain Healthcare stated in an interview that if the issues with generic pharmaceuticals ended today, the hospitals would stop the project because it would be unnecessary.

PHSI’s Assessment

These hospital systems underestimate the challenges ahead.  Established competition already exists and will not disappear.  The laws of supply and demand are a primary factor in current product availability and cost; whether the generic manufacturer has a profit motive is not a primary factor.  For-profit generic manufacturers have the incentive to produce and sell products where there is sustainable demand and profitably pricing opportunities.  Generic manufacturers are not ignoring their customers and planning on limiting their product sales.  There are challenges with access to quality active pharmaceutical ingredients (API), FDA regulations, and quality injectable manufacturing capacity.  Manufacturing generic injectable products is difficult and requires substantial investment to create and maintain a production facility.  When experienced manufacturers have challenges with manufacturing sterile injectables, how will an upstart project without experience do any better?

Do you think this new venture will succeed?


Published March 2018

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