Mark Cuban’s New Online Pharmacy Supplies Generic Drugs at Low Costs
Disruptive technologies can rapidly transform entire industries, often to the benefit of consumers. Uber and Airbnb changed transportation and travel for the better, though they also hurt traditional taxi drivers and hotels. Mark Cuban is now taking a similar approach to prescription drugs, trying to make generic medications more affordable.
He launched his own online pharmacy, called Mark Cuban Cost Plus Drug Company (MCCPDC), to tackle the rising cost of generic prescription drugs.
How does MCCPDC operate?
MCCPDC offers 100 different generic prescription drugs online and ships them straight to your home, at a fraction of the usual cost. Their model is built on full transparency: drug prices are set at a 15% mark-up from what they pay, plus a $3 pharmacy fee and $5 shipping to most of the 49 states they serve.
By cutting out the middlemen and buying directly from manufacturers, MCCPDC’s drugs are far cheaper than the same drugs sold at traditional pharmacies. For example, the cancer drug imatinib (Gleevac) costs just $17.10 a month on MCCPDC, versus over $2,500 a month at a typical pharmacy.1
This is a cash-only model that doesn’t accept insurance. But for some drugs, even insured patients may save money by paying MCCPDC out-of-pocket instead of dealing with copays and deductibles.
How does the traditional drug supply chain operate?
The United States has some of the highest drug prices in the world, largely because of how complex the drug supply chain is and because the government doesn’t negotiate prices with pharmaceutical companies. In this system, third-party pharmacy benefit managers (PBMs) negotiate with health plans and drug manufacturers to decide which drugs get sold, which are covered by insurance, and what they cost.
Manufacturers often give PBMs rebates so their drugs get covered by health plans, but those rebates rarely reach the consumer. This lack of transparency is a major reason drug prices stay high in the U.S. Because PBMs control access to nearly every big insurance company, most pharmacies have to work with them.
MCCPDC skips the PBM step entirely, buying straight from manufacturers to get the lowest possible price and passing those savings on to consumers. The tradeoff is that MCCPDC has no access to insurance reimbursements at all.
What benefits does this give?
The biggest benefit is that MCCPDC makes a large group of generic drugs far more affordable, covering conditions like cancer, heart disease, diabetes, and asthma. A recent study found that 26% of Americans struggle to pay for prescription medications, and 16% have skipped filling a prescription altogether because of cost.2
Generic drugs are cheap to manufacture, and MCCPDC plans to start manufacturing them directly at a facility in Dallas by the end of 2022, which should lower costs even further. What stands out most is the commitment to transparent pricing: a flat 15% mark-up plus a $3 dispensing fee on every drug they offer.
What are some disadvantages of this approach?
The biggest drawback is that you can’t use insurance to cover MCCPDC purchases, since the company bypasses the pharmacy benefit managers who control health plan reimbursements. This may not matter much if you have a high deductible or copay, since you could still save money overall. About 28 million Americans have no insurance at all, so MCCPDC can save them thousands of dollars a year.3 But if you use healthcare often or have a low deductible, you’ll likely hit that deductible quickly anyway and get your prescriptions covered through the traditional route.
Another disadvantage is the limited selection: only 100 generic drugs are available right now, and there are no brand-name options. Brand-name drugs without a generic equivalent tend to be far more expensive and typically rely on insurance coverage.
Seeing into the future
If MCCPDC can find a way to offer brand-name drugs or insurance coverage, it could reshape the entire industry. For now, Cuban’s model will help many Americans afford generic prescription drugs, though it’s still limited by its small drug list and cash-only setup. In the meantime, people who can’t use MCCPDC can turn to services like PharmacyChecker or GoodRx to find the lowest prices or rebates at traditional pharmacies.
References
- Olen H. Opinion: Can Mark Cuban help save the pharmaceutical industry from itself? February 2022, Washington Post. Available at: Can Mark Cuban help save the pharmaceutical industry from itself?. (accessed February 25, 2022).
- Kearney A, Hamel L, Stokes M, et al. Americans’ Challenge with Healthcare Costs. December 14, 2021, Kaiser Family Foundation. Available at: Americans’ Challenge with Healthcare Costs (accessed February 25, 2022).
- Keisler-Starkey K, Bunch LN. Health Insurance Coverage in the United States: 2020. September 14, 2021, United States Census Bureau. Available at: Health Insurance Coverage in the United States: 2020 (accessed February 25, 2022).
