RACHEL MARTIN, HOST:
Now a story about a hospital executive who was tired of short supplies and high prices for generic drugs, so he started something new last year. It's a nonprofit drug company called Civica. The goal is to provide hospitals with commonly used generics at reasonable prices. Now the organization has revealed the first two drugs it will provide. NPR's Selena Simmons-Duffin reports.
SELENA SIMMONS-DUFFIN, BYLINE: The drugs are antibiotics Vancomycin and Daptomycin. Why those two? Martin Trieste is Civica's president and CEO.
MARTIN VANTRIESTE: So Civica has a drug selection committee.
SIMMONS-DUFFIN: He said the committee looked for drugs that had shortages, were used in hospitals every day and had a big impact on patients. Then they divided the drugs into tiers.
VANTRIESTE: Vancomycin was at the top of Tier 1 - one of the most important drugs for our health system. Daptomycin was in the Tier 2 category.
SIMMONS-DUFFIN: So they're making both. Vancomycin is commonly used in hospitals for very serious infections that are resistant to other drugs. It's a big gun. When it's in short supply, doctors need to look around for alternatives, which can be dangerous to patients who are really sick. The problem of shortages is widespread. One survey of doctors last year found 9 out of 10 had dealt with a drug shortage in the previous month.
Erin Fox studies drug shortages at University of Utah Health, one of Civica's member health systems. She also recently joined Civica's advisory board. She says the real innovation here is a new kind of contract between drugmakers and hospitals.
ERIN FOX: You can pretty much predict how much product you're going to need at your hospital. And you can say, yep, I will purchase, say, 500 packages of this in a year. And you would have to sign up for that, and say, yep, I'm going to buy that. And if you don't, the company still gets the money.
SIMMONS-DUFFIN: That addresses the shortage issue. What about prices? President Martin VanTrieste says the goal is to make drugs cheaper by pricing them based on manufacturing costs plus a, quote, "fair margin" for the drugmaker - in this case, a Danish manufacturer called Xellia.
VANTRIESTE: Once we negotiate that price, we go back to our members and say, I have Vancomycin - one-gram vials. I'm offering it to you at X price. Do you want to opt in to purchase that product or opt out?
SIMMONS-DUFFIN: He expects to be able to offer the two antibiotics to Civica's 800 member hospitals this summer. That's when the experiment to prevent drug shortages and bring prices down will be tested.
Selena Simmons-Duffin, NPR News.
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