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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

Ro Khanna accuses Biden of quitting Middle East

Rep. Ro Khanna. Photo: Cody Glenn/Sportsfile for Web Summit via Getty Images

An outspoken progressive Democrat is wary of President Biden’s approach to the Middle East, arguing it’s like “conceding defeat of the aspiration” to win a Nobel Peace Prize.

Why it matters: A number of members of Biden’s own party dislike his Middle East strategy, as his administration signals the region is no longer the priority it was for President Obama and his predecessors.

Democrats eye reconciliation for immigration

Photo: Chip Somodevilla/Getty Images

Comprehensive immigration reform is a pipe dream, but some Senate Democrats are hoping to tie key immigration provisions to the next big reconciliation push.

Why it matters: Immigration is one of the most controversial and partisan issues in U.S. politics, which is why the budget reconciliation process — which allows for bills to pass the Senate with a simple majority rather than the usual 60 votes — is so attractive.

17 mins ago - Politics & Policy

Scoop: Biden meeting Quad amid own pivot toward Asia

Artists paint portraits of President Biden and Vice President Kamala Harris in Mumbai, India. Photo: Anshuman Poyrekar/Hindustan Times via Getty Images

President Biden plans to meet this month with the leaders of Japan, Australia and India in a virtual summit of the so-called Quad, according to people familiar with the matter.

Why it matters: By putting a Quad meeting on the president’s schedule, the White House is signaling the importance of partnerships and alliances to counter China’s growing influence in the Indo-Pacific region.