Blue Cross Blue Shield Invests in Nonprofit Aimed at Cheaper Drugs

The Blue Cross Blue Shield Association (BCBSA) and eighteen of its member organizations have agreed to invest $55 million in a nonprofit with the aim of creating cheaper versions of certain expensive generic drugs.

The partnership will acquire and develop Abbreviated New Drug Applications (ANDAs) for select generic drugs to bring more affordable generic drugs to uncompetitive markets in exchange for aggregated volume and multiyear purchasing commitments.

Initially, generic medications identified as having high potential for savings will be prioritized by the partnership and will evolve into a platform that can be used to enhance competition for additional generic drugs. The partnership expects to start with a focus on roughly seven to ten products and expects some of the initial offerings to be available in early 2022.

What is Civica?

Civica was founded in 2018 by a group of charitable foundations and hospital systems to address an ongoing shortage of essential hospital drugs. Since its inception, the group has contracted with for-profit manufacturers and is selling a variety of drugs, including antibiotics and morphine, that were previously in short supply. The chairman of Civica’s board, Dan Liljenquist, has noted that he believes the group’s success is due to its ability to guarantee a market to the manufacturers that consider making the products. Currently, almost fifty health systems are members and

To carry out the partnership with Blue Cross Blue Shield, Civica plans to create a subsidiary that will either manufacture the drugs directly, or contract with existing manufacturers. Civica is also hopeful that others will continue to join the effort, including other insurers, pharmacies, and even employers who all share the belief that “patients and their needs come first.”

Mr. Liljenquist said he was motivated to help create the nonprofit after reading about struggles by patients to afford old, off-patent drugs like those sold by Martin Shkreli and Valeant Pharmaceuticals International, a company with a similar business model.

Comments on the Partnership

Mr. Liljenquist was quoted in the New York Times, saying, “This will not solve all the problems of the world, but we do know that 90 percent of prescriptions are generic, and there are certain parts of the generic markets that are not functioning like competitive markets should. And we intend to compete in those markets.”

“We believe everyone should have access to health care, no matter who they are or where they live,” said Scott P. Serota, president and CEO of BCBSA. “Through this partnership, we will push toward the vital objective of providing greater access to much-needed medications. 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’s mission is to make quality medicines available and affordable to everyone,” said Martin VanTrieste, Civica president and CEO. “Serving patients is our privilege and our responsibility—one that we are proud to share with BCBS companies who are committed to tackling one of the most important health care challenges of our time. Numerous studies confirm that medication costs can dictate whether individuals fill or ration their generic prescriptions. Together with BCBS companies, we are taking action to put patients first.”

Maureen E. Sullivan, the chief strategy and innovation officer at the Blue Cross Blue Shield Association, said “Given the level of interest,” the alliance plans to explore making a generic version of insulin in the early years. Ms. Sullivan also said that the group planned to identify drugs that affect large numbers of people and that appear to be “stuck at a higher price.”