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Expand chart
Data: Q1 2010–Q1 2015 from U.S. Government Accountability Office, Jan. 1, 2016–Nov. 9, 2017 from Elsevier; Chart: Harry Stevens/Axios

Generic erythromycin, an antibiotic, saw price hikes every year from 2010 to 2017, ultimately ending up roughly 50 times more expensive than it started. It's not alone.

The market-based solution to this problem would be for a new company to start manufacturing those drugs. Often, however, there's a market failure, and the drugs remain hard to find or exorbitantly expensive for years.

At any given time, roughly 200 drugs fulfill four criteria:

  • They're available in generic form.
  • Like erythromycin, they're on the World Health Organization's list of essential medicines.
  • Their price has increased by more than 50%, in a way underlying market conditions can't justify.
  • They have suffered shortages that have harmed patients.

Enter Civica Rx, a nonprofit that intends to solve the problem by not making any money at all.

  • Civica is a consortium of seven hospital groups and three philanthropies. They've each already donated $1 million to the nonprofit, and have pledged to make at least $9 million more in loans, if necessary. That's total funding of $100 million.
  • Its hospital members can enter into a multi-year binding contract to buy large quantities of any given drug. That gives Civica, as a drug manufacturer, a lot of certainty when it comes to future demand.
  • Civica then contracts with its own vendors, locking in drug supplies for many years.

"Most generic manufacturers will never even run into us," says Dan Liljenquist, Civica's chairman.

  • Civica is not a danger to the generic drug industry; it will operate only as a manufacturer of last resort in the rare cases where that industry has experienced market failure.
  • "We don’t need to fix the whole market," Liljenquist tells Axios, "because the whole market’s not broken."

Expect to see Civica's first drugs hitting the market as early as the second quarter of 2019.

Go deeper: Read the rest of Axios' Deep Dive on prescription drug prices

Go deeper

Thousands without power as "hazardous" winter storm lashes East Coast

Winter view from Charlotte as winter storm Izzy creates dangerous conditions in Charlotte, N.C. on Jan. 16. Photo: Peter Zay/Anadolu Agency via Getty Images

A major winter storm was lashing much of the East Coast on Sunday, causing widespread power outages and disrupting travel over the holiday weekend.

The big picture: Heavy snow and ice accumulations are "likely to produce hazardous travel," downed trees and more power outages from the Mid-South to the Northeast, per the National Weather Service. Some parts of the U.S. can expect to see up to a foot of snow through Monday.

Updated 2 hours ago - Science

Volcanic eruption in Tonga caused "significant" damage

This satellite image of the eruption on Jan. 15 taken by Himawari-8, a Japanese weather satellite operated by Japan Meteorological Agency and released by National Institute of Information and Communications Technology (NICT). Photo: NICT via AP

Significant damage has been reported in Tonga following an undersea volcanic eruption on Saturday, which covered the Pacific nation in ash and cut off communication lines.

Driving the news: The eruption triggered tsunami warnings across Tonga's islands and in other regions, including the West Coast of the U.S. and New Zealand.

2 hours ago - World

North Korea launches 4th suspected missile test this month

A news broadcast in Seoul, South Korea, of an apparent North Korean missile test on Monday morning local time. Photo: Jung Yeon-je/AFP via Getty Images

North Korea's military fired "two suspected short-range ballistic missiles" eastward from Pyongyang on Monday morning local time, per South Korean and Japanese officials.

Why it matters: The fourth such launch since Jan. 5 comes days after North Korea's military warned of "stronger" action if the U.S. moved to have more sanctions imposed on the country.