SAN DIEGO — Civica Rx says it's dedicated to drug pricing transparency, but the recently launched generics maker is having difficulty delivering on that aim because of the way hospitals sometimes bill patients.
Bundled payments have been troublesome, according to the company's Chief Commercial Officer Heather Wall, as they don't lay out how much a patient is specifically paying for, or saving on, a drug compared to their total cost of care.
"The issue in the hospital space is a lot of the medications we're starting with, where drug shortages are a concern — primarily sterile injectables — end up being bundled," Wall said, speaking this week at the Drug Information Association's annual meeting. "And so we don't necessarily see what that translates to," in terms of cost to patients.
Civica Rx had already garnered interest or support from more than 120 health systems across the U.S. when it formed in September 2018. Its stated mission is to manufacture, either internally or through contracted groups, essential generic medications for hospitals, with an early goal of supplying 14 hospital-administered generic drugs.
The company's formation came amid intense scrutiny of healthcare costs, in particular drug prices.
While much attention has centered around the high price tags for branded pharmaceuticals, generics manufacturers haven't escaped criticism. Right around Civica Rx's launch, the Food and Drug Administration's then-commissioner Scott Gottlieb called out Nostrum Laboratories after its CEO defended a 400% price hike for an antibiotic used to treat bladder infection.
Teva Pharmaceutical also upset patients when the price for its generic version of Syprine, a Bausch Health Companies drug for Wilson's disease, didn't come in much lower than the reference product.
The attorneys general of 44 states, meanwhile, are suing 20 generic drugmakers on charges of price fixing.
As the backlash has grown, so too have calls for greater transparency around how patients' out-of-pocket costs are determined.
It's an issue Wall said she dealt with often during her time at Intermountain Healthcare. There, she operated a hospital that served an inner city population and housed a 60-bed behavioral health unit.
"When you think about that kind of the mix of patients, the cost of medication is insanely impactful," she said.
"We would go through our patient list day after day after day in the emergency room, especially in that 60-bed behavioral health unit, and assess the number of patients that were physically there receiving care because they could not afford the medication that should have been available to them."
The situation can be worse too when the necessary drug is in short supply.
Adam Kroetsch is a research director at the Duke-Margolis Center for Health Policy and former deputy director in the FDA's Office of Program and Strategic Analysis. During the DIA panel, he recalled how hospitals often weren't sure about how the costs related to a drug shortage compared to the typical price of the drug itself.
"To a certain extent, when they decide to invest money to try and prevent shortages, they're taking a little bit of a leap of faith," he said. "And it would be great if there was a little more data, a little more transparency on what the cost of that was."
Civica Rx says it's trying to stabilize the supply chain around these kinds of drugs while also providing patients — as well as the company's partner health systems — with information about the steps that led to a drug's billing price, such as finished dose formulation.
And by doing the manufacturing itself, Civica Rx claims it can sell drugs at a single price point to each of the health systems, which could in turn make their budgeting process simpler.
"How in the world can either a health system or a patient understand where they should be purchasing their product if they don't know what it costs and why it costs that?" Wall said.
Yet bundled payments present a challenge, and not just with regard to transparency. A study from the Government Accountability Office published early this year found healthcare providers frequently chose not to participate in Medicare's voluntary bundled payment models if there were risks of reduced payments or financial penalties.
There are supporters of the model, however. Insurance giant UnitedHealthcare in April announced its intention to expand use of bundled payments with Medicare Advantage plan providers, citing lower costs from the payment structure. Additionally, recent studies published in JAMA found the CMS' bundled payment models offered, at least in some cases, better patient care and reduced costs.