The COVID-19 pandemic revealed a US dependence on foreign generic drugs, which can leave the supply chain vulnerable. It is highlighted that the supply of many generic drug products in the US is reliant of exports from China. For example, approximately 90% of pharmaceutical ingredients used for essential generic drugs treating serious coronavirus infections in US are made in China.

Following the start of the pandemic, several bills have been introduced to address foreign dependence on generics. The study outlines that these have three key objectives: ‘(1) to provide funding to encourage domestic production of generic drugs, (2) to improve the transparency of the generic drug supply chain information and assess its vulnerability, and (3) to require that critical drugs purchased by Strategic National Stockpile be “Made in America”’. In addition, the Defense Production Act provides funding to establish domestic manufacturing facilities and mandated that some essential generics purchased by the federal government are produced domestically. Together, such initiatives aim to reduce the cost differential between domestic and overseas production.

Non-profit generic drugs manufacturers
The study notes that generic drugs production is often high risk with a thin profit margin. As such, it is not always appealing for for-profit organizations that need to reward investors. This means that non-profit organizations that do not need to make profits to attract, gain and reward investors, could offer a potential way to develop the market.

Non-profit generics manufacturers would be able to make direct contracts with health systems, insurance companies and pharmacies. They can also accommodate fully transparent cost-plus pricing model and multi-year purchasing, ensuring demand, and reducing revenue volatility and operating risks. Such operating models are unattractive for for-profit organizations. However, if the federal, state and local governments decide to purchase generic drugs that are “Made in America”, then the market for non-profits may be substantial.

The study suggests that initial investments required, could come from philanthropists, government grants and/or loans. Overall, the establishment of domestic drug production would improve the supply chain resilience and national health security, reduce foreign dependency, and create jobs and a skilled workforce.

Civica Rx
The study concludes by highlighting the success of non-profit generics manufacturer, Civica Rx. Established in 2018, Civica Rx was funded by large health systems and philanthropies. It now provides over 40 drugs and constitutes approximately a third of the US inpatient drug market. It has now formed an outpatient subsidiary.

Civica Rx aimed to provide competition with for-profit companies and keep generics prices low. Its initial success suggests that non-profit generics manufacturers can offer competitive pricing and are able to address supply chain vulnerability.

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Reference
1. Liljenquist D, Bai G, Sarpatwari A, et al. A non-profit approach to address foreign dependence of generic drugs. J Law Med & Ethics. 2021;49(1):30-3.

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