New not-for-profit generic company will not benefit CMO industry, says GlobalData

The new not-for-profit generic pharmaceutical company, to be created by five hospital organisations, is unlikely to benefit the contract manufacturing organisation (CMO) industry, according to data and analytics company, GlobalData.

“Our initial reaction is that the group has some significant hurdles to overcome, the most serious of which is the manufacturing capacity to produce the drugs,” explained Jim Miller, president and founder of PharmSource, a GlobalData company. “Constraints on good manufacturing practices (GMP)-compliant capacity have been a significant contributor to the product shortages the new initiative seeks to address.”

The formation of new generics company was recently announced by the consortium lead, Intermountain Healthcare. There are five organisations currently involved, representing 450 hospitals, and this number is expected to increase. The consortium aims to address the issue of medicine shortages and drug pricing.

This initiative, however, faces a difficult decision, as reported by GlobalData. It will either need to build sophisticated procurement, quality assurance and distribution operations capable of creating and managing a global network of active pharmaceutical ingredient (API) and drug product suppliers or it will need to build a manufacturing facility that will require a sizeable investment and number of years to complete.

“It’s also worth noting that none of the advisory committee members named in the hospital group’s press release has any significant generic industry experience,” Miller continued. “Until more details become available, we think it unlikely that this new initiative will be a benefit to the CMO industry. A more likely scenario, at least in the near term, is that the hospital group evolves into a purchasing consortium that negotiates contracts with existing generics companies guaranteeing pricing and volumes sufficient to maintain a stable supply of the products currently in short supply.”