Creating a New Type of Corporation

CHALLENGE

We led the formation of a new not-for-profit generic drug manufacturing company designed to address an acute and ongoing shortage of generic drugs, described by the FDA as a public health crisis. This shortage has persisted for decades and threatens patient care and safety in general and adversely affects the most vulnerable—low-income individuals and their families.

SOLUTION

We advised a health care system and its subsidiary, representing about 500 U.S. hospitals, and several other health systems in the structure and formation of a new not-for-profit generic drug manufacturing company that will help patients by addressing shortages and high prices of lifesaving medications. This new entity was formed by seven leading health systems and three major philanthropies with interest in public health solutions to address the generic drug shortage problem. Our team was responsible for novel corporate and tax structuring matters, and led the negotiations with in-house and outside counsel for the seven health systems and the three foundations. The unique corporate and tax structure of this not-for-profit generic drug manufacturing company make it the only corporation of its type in the United States.

RESULTS

A seminal deal for the health care industry, more than 120 health organizations representing about a third of the nation's hospitals have expressed a commitment or interest in participating with our client. The pre-agreed commitment to purchase a minimum volume of a drug allows our client to contract with manufacturing organizations to produce minimum levels of drugs for a period of years. This approach will have several different, cumulative effects on the supply of needed drugs to the member health care organizations and their patients for years to come.