Medicines and medical devices rarely come from the nonprofit sector. There are more than 2,600 for-profit pharmaceutical companies in the U.S., but only three nonprofits that have products on the American market. Even something as seemingly prosaic, often off-patent, and widely used as birth control is dominated by big pharma, which has had little incentive to innovate or lower its pricing.
The first nonprofit to introduce a medical device — an IUD — to the U.S. market,
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Drugs and medical devices rarely come from the nonprofit world. There are more than 2,600 for-profit pharmaceutical companies in the United States, but only three nonprofits have products on the American market. Even something as seemingly prosaic, often off-patent, and widely used as birth control is dominated by big pharma, which has had little incentive to innovate or lower its pricing.
The first nonprofit to introduce a drug-device product — an IUD — to the U.S. market was Medicines360.
Its genesis goes back to 2008, when an anonymous foundation saw that one of the most effective and reversible birth-control methods, the hormonal IUD, was too expensive for most women. (Tax filings show the anonymous philanthropy to be the Susan Thompson Buffett Foundation as reported by Bloomberg.) Even insured women might be billed copays of up to $1,000. The foundation, partnering with pharmaceutical scientist and MacArthur fellow Victoria Hale, decided to make a six-year, $82.2 million investment to develop a low-cost hormonal IUD through a nonprofit company.
“The real goal of the donor and of Medicines360 was to provide this product to safety-net clinics at a very, very affordable price,” said Medicines360’s Autumn Ehnow, referring to health-care sites that serve uninsured patients.
Medicines360 recently issued a report with public-affairs firm Waxman Strategies summing up what worked and what did not in the seven years since it distributed devices for $50 apiece. The organization recounts meeting its goals: It expanded access to the device and introduced competition into the market and thus lowered prices.
However, it also faced unanticipated roadblocks, including the discovery that a low cost did not necessarily guarantee market adoption of the product.
Arnold Ventures, another supporter of the project (which declined an interview about Medicines360), cites in an article about nonprofit pharmaceutical organizations on its website the substantial challenges faced by this business model, including a tax code and Food and Drug Administration regulations unfavorable to nonprofit pharmacies, a lack of access to investment, middlemen who benefit from distributing drugs that are high-priced, and even Medicare and Medicaid programs whose policies do not necessarily favor low-cost drugs.
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Still, supporters see a reason, even an imperative, for foundations and nonprofits to help level the playing field by enabling nonprofit groups to develop medical products so everyone has access.
Medicines360 is currently urging regulators and lawmakers to change federal rules to make it easier for nonprofits that develop products to meet public-health goals. Meanwhile, the organization further stepped into the political fray in January, when in the midst of a national debate about abortion access it introduced an emergency contraceptive pill through its for-profit subsidiary.
Widely Unavailable Product
Ehnow, who is Medicines360’s executive vice president for policy and strategic market access, first met Victoria Hale at OneWorld Health, the first nonprofit pharmaceutical company in the United States, which Hale founded in 2000. OneWorld Health’s success in tackling international health scourges such as black fever in India drew notice in philanthropy and attracted major donors, like the Gates Foundation. The Buffett foundation approached Hale with the idea for expanding access to hormonal IUDs.
(Representatives from the Susan Thompson Buffett Foundation, named after business titan Warren Buffett’s deceased wife, did not reply to requests for comment regarding funding for Medicines360. Medicines360 did not confirm or deny Buffett funding.)
In a 2008 interview, Judith DeSarno, the Buffett Foundation’s former director for domestic programs, explained Buffett’s interest in funding contraception: “For Warren, it’s economic. He thinks that unless women can control their fertility — and that it’s basically their right to control their fertility — that you are sort of wasting more than half of the brainpower in the United States.”
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Talks between Hale and the Buffett Foundation began in 2008, and it was quickly decided that the new venture would be a nonprofit, in the mold of OneWorld Health.
Ehnow says it was easy to see why OneWorld should be a model for Medicines360. “We really learned in that company a lot of key components of why we set Medicines360 up the way we did. Once for-profit pharma gets control, decision making has to be driven from a profit perspective.”
At the time, Bayer was the only manufacturer of hormonal IUDs, which were approved for only a small demographic: women who had already had children.
Nobody had done research on women of color or overweight or obese women, a large percentage of American women.
And there were other limitations to the product’s uptake. Tina Raine-Bennett, who became the third CEO after Hale, was running a teen clinic at San Francisco General Hospital around the time Medicines360 was being formed.
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“We could not provide this hormonal IUD to our patients because they were not insured,” said Raine-Bennett. “So here we had a great product, but it was only available to well-insured or well-off women.”
That began to change with the passage of the Affordable Care Act in 2010 (though provisions of the act were fully implemented only in 2015), which required most private health-insurance plans to cover contraception, and expanded Medicaid eligibility for reproductive health and family-planning services to low-income women who did not otherwise qualify for Medicaid.
Still, for uninsured women or those whose health plans were not regulated by the federal act, costs remained high. Low-income and uninsured women are disproportionately women of color; studies also show that women of color have higher rates of unintended pregnancies than white women.
The (Expensive) Road to Market
When Medicines360 officially launched in 2009, there was one hormonal and one copper IUD on the market in the United States, and patents had expired some time ago. These normally would be conditions ripe for a generic product. However, for-profit pharmacies were not interested for several reasons, including concerns about marketability.
IUDs were saddled with a bad reputation in the United States due to a defective device, the Dalkon Shield, marketed in the 1970s, which caused severe infections and even deaths. Though other IUDs did not carry the risks of the Dalkon Shield, negative views of IUDs persisted for decades in the American market, and other manufacturers withdrew their products for fear of litigation and because of low demand. (Internationally, IUDs are the most commonly used method of reversible female contraception.) Also, as a result of Dalkon Shield fallout, regulations for medical devices became stricter.
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So although there was already an existing product, and patents for the product had expired, Medicines360 still had to conduct a large and expensive phase-three clinical trial to test the IUD’s safety and efficacy and win Food and Drug Administration approval.
“We went through the same process that a pharmaceutical company would go through to bring a new product,” said Raine-Bennett. (A streamlined approval process for hormonal IUDs went into effect in 2021.)
The nonprofit began by acquiring a hormonal IUD already in development, conducting tests for FDA approval and creating a commercial partnership with a traditional pharmaceutical company to bring it to market. It made sure to retain ownership of the product to protect the product’s public-health mission. It was a complex, yearslong journey, which explains the project’s $82 million cost.
“The barrier to U.S. market entry was not IP,” said Ehnow. “It was just purely no one had been interested or able to raise those kinds of funds.”
Others in health nonprofits concur that access to that kind of money is not the norm.
“What was shocking to me about this is seeing the whole price tag,” said Alina Salganicoff, senior vice president and director of women’s health policy at Kaiser Family Foundation, noting that her organization also received funds from the same donor. The cost demonstrates the complexity of “what it takes to go through an FDA approval process,” she added.
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“That’s a huge amount of money in our field,” agreed Rebecca Callahan, director of research and operations at FHI 360, an international health nonprofit based in North Carolina. (There is no relation between Medicines360 and FHI 360.) She continued, however, “That is what pharmaceutical development costs.”
After the product, Liletta, launched in 2015, Medicines360 continued to broaden its approved usage. Today, it is approved for all women of reproductive age, not just those who had born children, and last fall the FDA extended its use for pregnancy prevention for up to eight years. (Before Liletta entered the market, Bayer’s Mirena device was approved for only five years’ use.)
“It’s a really big deal that now they’re hopefully going to be made available to much larger proportions of the population,” Callahan said of hormonal IUDs.
‘If We Build It, They Will Come’
A 2011 study showed that women confronted with an out-of-pocket expense of more than $50 were less likely to choose an IUD. The study greatly influenced Medicines360’s decisions on price. Yet the nonprofit’s hypothesis that “if we build it, they will come,” as Ehnow put it, turned out to be not quite accurate.
Though the nonprofit predicted it would sell 100,000 devices to safety-net clinics and hospitals in its first year, its actual sales were less than half of that.
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Obamacare was a complicating factor. Because of the Affordable Care Act, clinics and hospitals knew they would be reimbursed so they had less incentive to keep purchasing prices low.
What’s more, from the time the device leaves the manufacturer to the time it enters a clinic, it passes through many supply-chain intermediaries. Wholesalers, for example, charge a fee typically based on the list price of a drug. Naturally, these market players prefer higher-cost drugs because they make more money. However, for clinics that have a high proportion of uninsured patients, Liletta’s low cost is still attractive.
And that’s where Ehnow sees the nonprofit’s greatest victory: its service to the poorest women, who have been able to get the device at low cost. (After conducting market research and considering its own costs, Medicines360 increased Liletta’s price from $50 to $100.) More than 435,000 units have been sold at a low price in the United States, saving the health-care system $100 million.
Ehnow also points to the broader use of the hormonal IUD since Liletta’s entry into the U.S. marketplace, and how it forced a multinational pharma to lower its costs and expand the period of time for which it could be used to eight years, equal to Liletta’s.
“They brought competition to bear and allowed for the price of the Bayer product to come down,” Callahan said. “That’s a huge win.”
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State and Federal Policies
Part of Medicine360’s mission is to help enact state and federal policies that support its work. The nonprofit has been working with lawmakers such as Sen. Jacky Rosen, Democrat of Nevada, and Sen. Mitt Romney, Republican of Utah, on legislation whose goal is to increase Americans’ access to affordable medicines.
It is expecting two reports from the U.S. Department of Health and Human Services on nonprofit pharma, due within the year, as well as one from the Government Accountability Office, due at the end of 2024.
One of the biggest issues the nonprofit hopes to ultimately address is the tax status of nonprofit pharma. To accomplish its mission of serving public health, Ehnow argues, it needs to have a steady revenue stream. Being allowed to sell its own products would provide that. But under current tax law, a nonprofit selling drugs, even at a low cost to public clinics and hospitals, would jeopardize its nonprofit status. Pending legislation introduced by Senator Rosen attempts to change this situation.
Another barrier the nonprofit faces is its limited ability to raise funds. As Raine-Barrett puts it: On the one hand, the nonprofit doesn’t have shareholders who demand profits; on the other hand, it also doesn’t have funds that shareholders would bring. Traditional venture capitalists, focused on profits, are uninterested.
As Medicines360 states in its report, its recommendation is that Congress enable federal funds for nonprofits that develop products with targeted public-health goals. In addition, to improve clinical trial data, it recommends that Congress offer grants to nonprofit manufacturers that commit to conducting clinical trials in diverse populations.
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On the state level, Medicaid is a focus of much of the organization’s energy because Medicaid is regulated on a state-by-state basis.
“I spend a significant amount of thinking with my team on how do we really change the ways these products are covered and provide access points to them,” Ehnow said. Actions include supporting policies that enable patients to access care close to where they live, as well as removing barriers to reimbursements of the products.
‘We Didn’t See Dobbs Coming’
On the national stage, Medicines360 has been cheered in recent months by the introduction of a low-cost insulin product by Civica Rx, a fellow nonprofit pharmaceutical company, which has forced for-profit pharma to drastically lower its prices.
“We were pretty excited when we saw Civica come into the marketplace almost 10 years after we were founded,” Ehnow said. “And they’ve done fantastic work. And there’s others that are coming in behind them. But right now it’s just us and Civica that have products approved in the U.S.”
A third product, an over-the-counter naloxone nasal spray to reverse opioid overdose, from the nonprofit Harm Reduction Therapeutics was approved by the FDA in July.
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At the same time, the group is wary of political headwinds that swept in after the Supreme Court’s Dobbs decision.
“We didn’t see Dobbs coming last year, and we got comfortable,” Raine-Bennett said. The decision to overrule Roe v. Wade served to “underscore how our focus on women’s health is important.”
“There is the potential of restricting contraceptive access,” she acknowledged, as a result of the current political climate.
As one of the clinic’s medical directors said in the Medicines360 report, “In this moment of defunding, we would not be able to offer as much free care as we are if it weren’t for [Medicines360’s hormonal IUD’s] low pricing.”
In January, the group stepped into the storm with the launch of its second product: an emergency contraceptive pill. It is sold under the auspices of a for-profit subsidiary of Medicines360, Curae Pharma360, founded in 2021. The group made the decision to commercialize the pill in the aftermath of the Dobbs ruling and subsequent shortage of emergency contraception. Curae’s infrastructure provided the fastest time to market for the product compared with the nonprofit Medicines360.
“We now have the ability to do sales and distribution of our own products,” says Ehnow, who, in addition to her role at Medicines360, became the chief operating officer of Curae.
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But the group’s public-health mission always comes first and foremost, she said. As such, Ehnow feels that Medicines360 should serve as a model to philanthropy on how to address gaps in access to medicine and medical devices. A helpful step now would be to address the inequities in the market that exist for nonprofit pharma.
“My hope is that philanthropists really see how this is the fundamental game changer and really drives change in the system and the marketplace dynamics,” Ehnow said.
Raine-Bennett added, “We have a catalytic effect, making for-profit pharma step up to the plate.” (In June, Raine-Bennett stepped down to practice medicine; the organization’s new CEO is Andrea Olariu, who previously served as CEO of Curae Pharma360 and COO of the nonprofit.)
Taking a wide view, Kaiser Family Foundation’s Salganicoff chimed in. “Thinking about the role of philanthropy, it is kind of an open door where the private sector doesn’t want to go. The opportunity that philanthropy has is that they can develop a lot of other metrics for success other than making money.” But, she added, “getting new pharmaceutical products on the market requires significant and sustained investment.”
Reporting for this article was underwritten by a Lilly Endowment grant to enhance public understanding of philanthropy. The Chronicle is solely responsible for the content. See more about the Chronicle, the grant, how our foundation-supported journalism works, and our gift-acceptance policy.