January 23, 2020 / 12:49 PM / in 4 months

Blues health insurers put up $55 million to take on generic drug makers

NEW YORK (Reuters) - A group of Blue Cross Blue Shield insurers is investing $55 million in a venture that aims to offer cheaper prices to their members on generic drugs that currently have little or no competition, the companies said on Thursday.

FILE PHOTO: Pharmaceutical tablets and capsules are arranged in the shape of a U.S. dollar sign on a table in this picture illustration taken in Ljubljana August 20, 2014. Picture taken August 20. REUTERS/Srdjan Zivulovic

The Blue Cross Blue Shield Association (BCBSA) and 18 Blue Cross Blue Shield health insurers are working with Civica Rx, a non-profit formed two years ago to try to increase competition for hospital-based generic drugs.

The new subsidiary will focus on drugs that members can purchase via mail order or in retail pharmacies. Starting in 2022, it plans to begin selling new rivals for about 7 to 10 expensive generic medicines that currently have just one manufacturer, Civica Chairman Dan Liljenquist said. An advisory board will select the drugs.

Civica will be able to sell the drugs at a lower price than a current manufacturer by leveraging the volume of prescriptions among its Blues plans members to guarantee discounts, Liljenquist said. The company may also manufacture drugs itself.

Members will benefit from those lower prices based on their plan design, BCBSA strategy head Maureen Sullivan said. The lower cost to the Blues plans could translate into lower out-of-pocket spending, savings on the overall premium or potentially a lower co-pay or a co-pay waiver for patients, she said.

About 78% of the $335 billion in annual U.S. drug spending goes to generic versions of branded drugs that have lost patent protection, according to generic industry trade group, the Association for Accessible Medicines.

Large generic drug manufacturers say price competition has severely crimped profits for many of their drugs, leading to industry consolidation. That has increased the number of drugs with only one manufacturer, which can result in significant price spikes on lifesaving medicines.

Some particularly egregious recent examples of price gouging or drug shortages led the U.S. Food & Drug Administration to enact new policies to try to ease the process for approving new rival generic drugs where there are only one or two existing versions available.

A Civica spokeswoman said that as of the beginning of this year, it was either supplying or producing a total of 18 hospital-based medicines including commonly used medicines like bacitracin, lidocaine and morphine. Generic manufacturers that currently produce them include Hikma Pharmaceuticals (HIK.L), Xellia Pharmaceuticals and Exela Pharma Sciences, she said.

Participating Blues plans include Independence Blue Cross, Blue Shield of California and Highmark Blue Cross Blue Shield among others.

Reporting by Caroline Humer; Editing by David Gregorio and Bill Berkrot

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