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Civica Rx wants copycats to adopt its model for fixing US drug shortages

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Civica Rx wants copycats to adopt its model for fixing US drug shortages

Civica Rx is not worried about the competition. In fact, the company is hoping other organizations will adopt its disruptive model of trying to fix the problem of drug shortages, when Americans are left without the medicines they need, CEO Martin VanTrieste said.

SNL ImageCivica Rx CEO Martin VanTrieste
Source: Civica Rx

He noted that some companies are already starting to follow in Civica's footsteps, like Premier Inc., which recently launched ProvideGx, though it is not fully a copycat.

Even a proposal by Sen. Elizabeth Warren, D-Mass., to give the U.S. government the power to make generic medicines in certain cases "is remarkably similar" to Civica's business model, VanTrieste told S&P Global Market Intelligence.

Civica, headquartered in Lehi, Utah, got off the ground in September 2018 with the idea of specifically targeting injectable generic medicines for production that are in short supply or inaccessible, marketing the products under long-term contracts to member health systems and cutting out the middlemen distributors.

The nonprofit company expects to have its first product, the antibiotic vancomycin, available for hospitals by the end of September — a remarkable accomplishment for a one-year-old venture.

"In my entire career, I've never seen anything take shape and have that much momentum and deliver so many results in such a fast period of time," VanTrieste said.

He said the company anticipates bringing 16 products to market this year — potentially even exceeding that mark and already above the 14 it initially expected to reach.

But VanTrieste noted there are over 200 drugs currently on the U.S. Food and Drug Administration's drug shortage list.

A new kind of venture

Civica Rx was the brainchild of Daniel Liljenquist, senior vice president and chief strategy officer at Salt Lake City-based Intermountain Healthcare, who wrestled over how to best go about solving the ongoing drug shortage problem that has plagued U.S. hospitals for years, VanTrieste said.

He said Liljenquist had pitched the idea at a number of meetings of creating a nonprofit company to make injectable generic medicines under a partnership formed by hospital healthcare systems — the entities that most often must confront head on the problem of inaccessible therapies.

Intermountain convened an advisory meeting in September 2017 with a group of health systems and others to garner input about establishing such a venture.

SNL ImageDaniel Liljenquist
Source: Intermountain Health

By January 2018, Intermountain executives and others involved in forming Civica revealed their plans to the public. After determining they had the business model nailed down, a proper name for the company and the appropriate leadership team on board, they launched it in September 2018 with $100 million from Intermountain and its partners — an amount that has since doubled, VanTrieste said.

He noted that every health system and hospital that joins the Civica partnership makes a one-time financial contribution to the company based on the level of membership the entity chooses, VanTrieste said.

For a board of directors membership, entities provided a one-time payment of $10 million, while the so-called founding members contributed a one-time payment of $5 million each.

Partnering members pay a one-time contribution of $300 per licensed hospital bed — an amount that is capped at $1 million, VanTrieste said.

Right now, Civica is relying on its manufacturing partners to make its products.

Xellia Pharmaceuticals ApS is manufacturing Civica's vancomycin and will also be making another antibiotic, daptomycin, while Hikma Pharmaceuticals LLC is expected to produce 14 medications from various classes of drugs.

Civica is also planning on building its own FDA-licensed manufacturing plant, estimated to cost about $100 million, VanTrieste said. The location of that facility has yet to be determined.

Transparency is critical

VanTrieste emphasized that transparency with its manufacturing and pricing is at the heart of what Civica Rx is attempting to achieve with its business model.

"There are no secrets behind the curtain," the Civica CEO said.

All of Civica's products will identify in the labeling the plants and locations where the medicines were made.

Civica also plans to disclose the country of origin for their raw materials, "which is extremely rare," said Erin Fox, a pharmacist and senior director of drug information and support services at University of Utah Health.

"When you read warning letter after warning letter about data fraud and poor quality systems at manufacturers, you want as much information as possible in order to make a quality-based purchasing decision," said Fox, who has long tracked U.S. drug shortages and is a member of Civica's advisory board. Her health system is also one of Civica's members.

VanTrieste said Civica's prices will be comparable to what is being charged in the marketplace.

SNL Image

As a nonprofit, the company is not beholden to shareholders, so it is able to pursue injectable medicines other companies have abandoned, yet it can remain competitive, he said.

Health systems are increasingly demanding the type of openness practiced by Civica, VanTrieste added.

Similar models

VanTrieste noted that he has made a number of trips to Capitol Hill to talk about Civica's business model. While he said he has not discussed the similarities between the proposal from Massachusetts' Warren and Civica's model with the senator, he has met with her staff.

At least seven other presidential candidates, including Sen. Bernie Sanders, I-Vt., responded to a Washington Post survey that they supported government manufacturing of generic medicines in certain cases.

But VanTrieste said there is no need for government manufacturing of drugs — something tried with vaccines, but later abandoned — when there is a private-sector solution in what Civica is already doing.

While there are similarities in Premier's ProvideGx, that entity does not have its own manufacturing arm and does not engage in the type of long-term contracts Civica uses, he said.

Civica also will be providing redundant manufacturing and will keep a strategic stockpile of at least six months of inventory to protect against disruptions, VanTrieste said.