January 18, 2018 / 4:37 PM / 6 months ago

UPDATE 1-U.S. hospital systems team up to launch generic drugmaker

(New throughout, adds analyst comment, background, generic drugmaker share moves)

By Michael Erman

NEW YORK, Jan 18 (Reuters) - A group of four hospital systems plans to launch a not-for-profit generic drugmaker aimed at combating shortages and high costs of some generic drugs, which they blame on unscrupulous drug companies that hike prices.

Intermountain Healthcare said on Thursday it was working with three other large U.S.-based hospital systems including Ascension, SSM Health, and Trinity Health, to form a new FDA approved manufacturing company. Shares of generic drug makers fell after the announcement.

An Intermountain spokesperson said the company initially plans to subcontract with manufacturers to make the drugs, including essential medications that are administered in hospitals.

The companies did not specify which drugs they plan to manufacture. The United States is currently experiencing shortages for nearly 150 drugs, including some morphine injections, according to the American Society of Health-System Pharmacists.

Cantor analyst Louise Chen was skeptical about the impact the hospitals could have on the generic market.

“Sterile manufacturing is very difficult. Many large, highly resourced companies have not been successful at it,” she said in a research note.

The new company is being formed in consultation with the U.S. Department of Veterans Affairs, the hospitals said. The five organizations represent more than 450 hospitals around the United States.

The company will be guided by an advisory committee that includes former Nebraska Governor Bob Kerrey and two former Amgen Inc executives.

Shares of generic drugmakers fell on Thursday morning. Endo International PLC’s shares dropped more than 6 percent, Teva Pharmaceutical Industries Ltd’s U.S. shares fell 2.3 percent and Mylan NV’s shares were down around 1 percent after the hospitals’ plans were announced. (Reporting by Michael Erman; Editing by David Gregorio)

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