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Major insurers are teaming up with a nonprofit to cut the price of generic drugs

January 23, 2020, 7:15 PM UTC

A major coalition of health insurers is committing $55 million to partner with an upstart nonprofit with the goal of lowering generic drug prices.

On Thursday, the Blue Cross Blue Shield Association (BCBSA) announced that 18 of its member Blue Cross Blue Shield health insurance companies (which cover about 40 million Americans) has struck a partnership with Civica Rx with the express goal of lowering the cost of certain generic drugs. The partnership will create a separate subsidiary that other players in the medical industry, including health plans and employers, could join at a later date.

“Through this partnership, we will push toward the vital objective of providing greater access to much-needed medications,” said BCBSA president and CEO Scott P. Serota in a statement. “As BCBS companies and Civica embark on this important work, we hope others will join us to achieve the change Americans want to see in the health care system.”

Civica Rx was formed in 2018 with an intriguing mission and structure: Tired of high generic drug prices inside of the hospital setting, Intermountain Healthcare and massive hospital chains like Ascension, Trinity Health, HCA Healthcare, the Mayo Clinic, and others, set up Civica as a nonprofit to create and distribute certain generic drugs, focusing on treatments that face shortages or have experienced major price hikes.

Generics are still far cheaper than their branded counterparts, but research from the AARP found that 23% of 390 generic treatments commonly used by elderly Americans experienced a price increase in 2017, the latest year for which comprehensive data is available.

“Numerous studies confirm that medication costs can dictate whether individuals fill or ration their generic prescriptions,” said Civica president and CEO Martin VanTrieste in a statement on Thursday.

The Blue Cross partnership now extends that project beyond the hospital setting. BCBSA and Civica have not specified which treatments will be targeted first, although high-cost generic drugs will be the focus. While branded drug price hikes tend to capture most of the media spotlight, generic drugs make up the lion’s share of the U.S. drug market, making up nearly 90% of all prescriptions, according to pharmacy benefit giant Optum.

The new subsidiary’s strategy involves snatching up and developing its own generic drug applications; once these treatments get a Food and Drug Administration (FDA) green light, they’d be sold in bulk volume at prices lower than what’s currently available in high-cost markets.

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