Addressing Generic-Drug Market Failures — The Case for Establishing a Nonprofit Manufacturer

Robust competition usually keeps the price of generic drugs well below that of brand-name drugs. When there is little or no competition, however, generic-drug manufacturers can substantially increase prices, and drug shortages may occur. Such market failures can compromise care and negatively affect patients, health care providers, government insurance programs, and private health plans. We believe that market-based solutions are an important alternative approach to stimulating competition in generic-drug markets. One such solution is to establish a nonprofit generic-drug manufacturer with the explicit mission of producing affordable versions of essential drugs and ensuring a stable supply of such products. A consortium of hospitals and health plans, including Intermountain Healthcare, Trinity Health, SSM Health, and Ascension, in collaboration with the Department of Veterans Affairs and philanthropists, is following this approach and developing a nonprofit generic-drug manufacturer code-named Project Rx. Citation: Liljenquist D, Bai G, Anderson GF. Addressing Generic-Drug Market Failures -The Case for Establishing a Nonprofit Manufacturer. N Engl J Med. 2018;378 (20):1857-1859.

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