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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

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Rahm Emanuel floated for Transportation secretary

Rahm Emanuel. Photo: Joshua Lott for The Washington Post via Getty Images

President-elect Biden is strongly considering Rahm Emanuel to run the Department of Transportation, weighing the former Chicago mayor’s experience on infrastructure spending against concerns from progressives over his policing record.

Why it matters: The DOT could effectively become the new Commerce Department, as infrastructure spending, smart cities construction and the rollout of drone-delivery programs take on increasing economic weight.

6 hours ago - Politics & Policy

Biden turns to experienced hands for White House economic team

Illustration: Sarah Grillo/Axios

Joe Biden plans to announce Cecilia Rouse and Brian Deese as part of his economic team and Neera Tanden to head the Office of Management and Budget, sources tell Axios.

Why it matters: These are experienced hands. Unveiling a diverse group of advisers also may draw attention away from a selection of Deese to run the National Economic Council. Some progressives have criticized his work at BlackRock, the world's largest asset management firm.

Biden taps former Obama communications director for press secretary

Photo: Mark Makela/Getty Images

Jen Psaki, who previously served as Obama's communications director, will serve as President-elect Joe Biden's press secretary, the transition team announced Sunday.

The big picture: All of the top aides in Biden's communication staff will be women, per the Washington Post, which first reported Psaki's appointment.