Adam Clark-Joseph was standing in the kitchen of his apartment in Urbana, Illinois, when he sensed that something was off. His daily dose of medicine usually took effect quickly, but he felt nothing. This was the third time in a few years that a drug prescribed by his psychiatrist suddenly didn’t work properly.
A self-described nerdy chemistry guy (by day he is a finance professor), he took out some lab equipment and began extracting the active ingredient. “Being as generous as I could, this stuff had about a third of what it was supposed to,” he says. “It was just massively underdosed. Beyond it just being a health issue, I was also insulted.”
The drug he tested in his kitchen that day was a generic. A previous problematic drug had been brand name, so he knew just avoiding generics wouldn’t solve his problem. Clark-Joseph decided there was only one way to ensure the dose and quality of his medicine in the future: He would test each refill. But when he called around, he couldn’t find any company that would do the testing—at any price.
So he set out to create his own pharmacy, a service that would test drugs before dispensing them. “If there had been an easier way, I would have done that,” he says. Today, along with molecular biologist (and former Yale classmate) David Light, he is the cofounder of Valisure, a mail-order pharmacy that tests each batch of drugs it receives from wholesalers or distributors (generic, brand name, and even some over-the-counter items) for dose, dissolution (an indicator of how quickly it is absorbed), and impurities. Customers only receive medicine that is free of contaminants and meets federal standards for dose and dissolution. They receive a certificate of analysis with each refill.
Valisure’s timing seems to be fortuitous. Dysfunction in the drug industry has triggered outrage over contaminated generics, massive price increases, and life-threatening shortages of cheap but vital products. Outrage is a catalyst of entrepreneurship, and now Valisure is one of several startups seeking to solve some of the industry’s most glaring problems. Among them are Civica Rx, which aims to eliminate the frequent shortages of dozens of medicines, and Capital Rx, which wants to make drug pricing less opaque.
And then there’s the whale in their midst: In 2018 Amazon announced a partnership with JPMorgan Chase and Berkshire Hathaway to create a nonprofit called Haven, which promises, in part, to make prescription drugs more affordable for the 1.2 million employees of those three companies. That year Amazon also acquired PillPack, a prescription drug delivery company. Haven's impact remains to be seen, but the hope is that its innovations will ultimately force the health care industry to improve.
“I think the entire pharmaceutical industry, branded and generic, is ready for major disruption,” says Martin VanTrieste, CEO of Civica Rx, who was previously chief quality officer of Amgen, a biopharmaceutical company. “Either pharmaceutical companies will do that themselves or someone else will come in and do it.”
In June, Valisure made the news after detecting the solvent and potential carcinogen dimethylformamide (DMF) in valsartan, a blood pressure medicine, in several lots of the drug—including one from Novartis, which originally developed valsartan. It was the fourth potentially carcinogenic chemical found in blood pressure medications in the past year.
The findings highlight the vulnerability of our drug supply. About 80 percent of the active ingredients in US drugs come from overseas manufacturers, predominantly China and India. The Food and Drug Administration doesn’t routinely test drugs; it relies on manufacturers to do the testing and report the results. But FDA inspections—and investigative reporting, such as in the recent books Bottle of Lies and China Rx—reveal incidents of falsified reports and shredded evidence.
Based on its testing, Valisure rejects about 10 percent of the drug batches it sees, for various reasons. The FDA requires generic drugs to be bioequivalent within 80 to 125 percent of the brand name drug (although, because of the way bioequivalence is calculated, the actual variation is less).
For people with certain conditions, such as epilepsy or heart failure, variations in dose can be dangerous. Generic drugs also vary in their inactive ingredients. But compared to a loaf of bread or box of cereal, “you don’t have nearly the visibility or the transparency,” Light says. No list of ingredients, warnings about possible cross-contamination with allergens, or information about where the ingredients were sourced.
Valisure has just begun offering an analysis service that allows anyone to send in samples of their drugs to find out the dosage, inactive ingredients, dissolution rate, and any impurities. The cost ranges from $40 to about $100, depending on the drug; the company currently offers tests on more than 2,000 drugs.
Civica Rx is addressing a very different problem—one with life-or-death stakes. In the second quarter of 2018, hospitals encountered shortages of 282 drugs, including electrolytes, antibiotics, and anesthetics. The shortfalls forced hospitals to cancel procedures and delay treatments. Medication errors have been linked to shortages, the result of health providers seeking replacements.
By early October, just over a year after its founding, Civica Rx will begin shipping its first product, the antibiotic vancomycin, to its member hospitals. More than 35 health systems, encompassing about 900 hospitals, have invested in Civica Rx. Every hospital, regardless of size, will receive the products at the same price, VanTrieste says.
Civica Rx is contracting with a generic drug manufacturer to make the antibiotic, but will do some independent testing to ensure quality, he says.
Like much in the pharmaceutical industry, drug shortages are a longstanding problem with complex dimensions. A major contributor is price; for many essential drugs used in hospitals, it’s too low. Manufacturers don’t find older generic products profitable enough to sustain their business.
By joining together to invest in a nonprofit drug maker and commit to purchasing its products, Civica Rx’s member hospitals add certainty to the market. In return, they receive a reliable supply at fair and sustainable prices, without the price spikes that have plagued hospitals in the past. Civica Rx also plans to keep a six-month inventory to help balance supply and demand.
For VanTrieste, a pharmacist with a long career in the pharmaceutical industry, this is a passion project. He came out of retirement and is working as CEO without compensation. He wants to make the drug supply more reliable, but not to eliminate competitors. That’s why he says Civica Rx plans to make about half of the supply that hospitals need.
“The more competition you have, the better the product will be at the most affordable price,” he says. “We do not want to be the sole supplier and become the problem we’re trying to solve.”
Transparency is a common theme among these pharma-related startups. Civica Rx will post information online about where its products are made. Another startup, Capital Rx, is challenging the way medicine prices are set at the pharmacy.
Companies that process prescription claims, known as pharmacy benefit managers, typically make money by charging more to employers than they reimburse to pharmacies. But secrecy in pricing means employers don’t know whether their contracted price is a good deal or a bad one.
“Imagine if you went to buy sneakers and everyone is charged a different price for the same brand, but the only price you could see was what you paid last time,” says Capital Rx CEO A.J. Loiacono. Capital Rx will charge the same unit price to all customers, based on a benchmark price maintained by the Centers for Medicare and Medicaid Services. It doesn’t make more money if a drug is more expensive. And it analyzes data for employers so they understand their employees’ health needs.
Erin Fox, an expert on drug shortages at the University of Utah, calls the startups “small dents in a giant pie of trouble … I’m not sure that pharma’s really worried about these new companies.”
But she notes that they are helping bring attention to problems, as well as possible solutions, at a time when Congress is beginning to pay attention too. So there’s potential for action on the cost, quality, and supply issues. And with Haven—the startup founded by business titans Jeff Bezos, Warren Buffett, and Jamie Dimon—still booting up, there’s finally some hope that the pharmaceutical industry will evolve under pressure.
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