Business Corpus: These Hospital Systems Are Aiming To Undercut Biotechs, DrugmakersGeneric-drug and biotech stocks plunged into the red Thursday after several leading hospital groups launched a nonprofit to undercut drug prices. The post These Hospital Systems Are Aiming To Undercut Biotechs, Drugmakers appeared first on Investor's Business Daily.

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Generic-drug and biotech stocks plunged into the red Thursday after several leading hospital groups launched a nonprofit to undercut drug prices.

In afternoon trading on the stock market today, generic-drug stocks collectively tumbled 2.4%, matching a similar decline for biotech stocks. Specialty drugmakers fared slightly better as shares slid nearly 1%.

Seven hospital systems are at the forefront, including industry leader HCA Healthcare (HCA). Together, the systems represent about 500 U.S. hospitals and will provide members for the board of the new Civica Rx. Three charities will also commit $30 million.

Kelli Rhee, chief executive of the Laura and John Arnold Foundation, took a dim view of the state of generic drugs in the U.S. It's among the charities putting up $10 million for Civica Rx in the form of a $1 million contribution and $9 million in loans.

"The chronic shortage of critical drugs compounded by skyrocketing prices is a double blow to our most disadvantaged populations," Rhee said in a written statement. "This initiative will disrupt the current market dynamic and provide short-term relief."

Generic Drugs In Focus

The nonprofit has already identified 14 hospital-administered generic drugs as its initial focus, according to a news release. Its goal is to stabilize the supply of essential drugs, a number of which are in shortage. The nonprofit expects its first products in early 2019.

Civica Rx is far from the first entity to criticize U.S. drug prices. President Donald Trump has critiqued drugmakers for "getting away with murder" in how they price medicines.

Earlier this summer, several drugmakers said they would abstain from planned hikes on drug prices, including Dow Jones components Pfizer (PFE) and Merck (MRK), as well as Novartis (NVS). Meanwhile, Trump is reportedly working on his blueprint for health care in the U.S.

At the center of the current debate is rebates from drugmakers. Middlemen known as pharmacy benefit managers, or PBMs, negotiate these rebates between pharmaceutical companies and insurers. Critics say the PBMs don't pass the savings onto patients.

Drug Prices Under Fire

The upcoming midterm election in November could put drug stocks to the test. Analysts tend to see a Democrat-controlled Congress being more likely to enact legislation that could put pressure on drugmakers to lower drug prices.

Meanwhile, companies like Mylan (MYL) say the generic-drug business in the U.S. is already unstable. Mylan is exploring strategic alternatives after its North America segment saw sales decline 22% in the second quarter.

Generic-drug makersalso face scrutiny on the state level. Last year, law enforcement officials from 45 states accused 18 pharmaceutical companies of conspiring to fix drug prices. Generic giants Mylan and Teva Pharmaceutical (TEVA) were among the accused.

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The post These Hospital Systems Are Aiming To Undercut Biotechs, Drugmakers appeared first on Investor's Business Daily.