Mark Cuban’s New Online Pharmacy Supplies Generic Drugs at Low Costs
Disruptive technologies have the power to rapidly transform industries often yielding considerable benefits to consumers. Platforms like Uber and Airbnb have completely changed the landscape of transportation and travel to the benefit of consumers, while also causing collateral damage to traditional taxi drivers and hotel industries, respectively. Most recently, Mark Cuban has endeavored to take on the prescription drug industry – trying to make generic drugs more affordable for consumers. He has launched his own online pharmacy, called Mark Cuban Cost Plus Drug Company (MCCPDC) to tackle the rising costs of prescription generic drugs.
How does MCCPDC operate?
MCCPDC offers 100 different generic prescription drugs through an online pharmacy, delivering the drugs straight to your home, at a fraction of the cost. Their model is focused on complete transparency, setting drug prices at a 15% mark-up from the cost they pay, with a $3 pharmacy fee and $5 shipping to most locations in 49 states in the US. By eliminating the middlemen in the drug supply chain and purchasing the drugs directly from manufacturers, MCCPDC’s drugs are substantially cheaper than the same drugs sold elsewhere in traditional pharmacies. For example, the cancer drug, imatinib (Gleevac) is sold as a generic for $17.10 a month on MCCPDC, but typically costs over $2500 a month from traditional pharmacies.1 This is a cash-only model that doesn’t accept insurance, but for some drugs, even the insured may be better off just paying MCCPDC out-of-pocket, rather than dealing with copays and deductibles.
How does the traditional drug supply chain operate?
The United States has some of the highest drug prices when compared to other countries mainly because of the complexity of the drug supply chain and the lack of negotiation by the government with pharmaceutical companies. In the drug supply chain, third-party pharmacy benefit managers (PBMs) negotiate with health plans and drug manufacturers to determine which drugs are sold by pharmacies, which are covered by health plans and what the prices of those drugs should be. Often manufacturers provide rebates on their drugs to PBMs, so that their drugs will be covered by health plans, but these rebates are not often passed on to the consumer, keeping costs for drugs high. Overall, this process is not transparent and is a leading reason that drug prices remain high in the United States. Because PBMs control access to all big insurance companies, the traditional drug supply model makes it necessary to work with them. MCCPDC cuts out the PBM role completely, going straight to the manufacturer, to get the cheapest price possible for drugs and transfer those savings directly to consumers. This approach also means that MCCPDC has no access to insurance reimbursements for drugs either.
What benefits does this give?
The greatest benefit is that MCCPDC is making a large group of generic drugs extremely affordable for many patients for a variety of illnesses, including cancer, cardiovascular conditions, diabetes and asthma. A recent study has shown that 26% of all Americans struggle to pay for prescription medications, while 16% have not filled a prescription at all due to cost.2 Generic drugs are typically very inexpensive to manufacture and MCCPDC intends to expand their business model to actually manufacture the generic drugs themselves at a manufacturing site in Dallas by the end of 2022. This should further reduce costs for consumers. What is especially commendable about his approach is the focus on transparency in pricing. For all drugs they offer, MCCPDC has a 15% mark-up on the cost they pay for a drug, with a $3 pharmacy dispensing fee.
What are some disadvantages of this approach?
One of the biggest drawbacks is that you cannot use insurance to cover the cost of the drugs. Drugs bought through MCCPDC cannot be reimbursed through insurance because of the fact that they are circumventing pharmacy benefit managers, which have a monopoly on health plan reimbursements. This might not be a problem if someone has a high deductible or co-pay with their insurance, because they could still be saving a lot of money through MCCPDC. And given that about 28 million Americans have no insurance at all, using MCCPDC can save them thousands on medications during the year.3 However, if someone is frequently using healthcare services and/or has a low deductible on their insurance, they are likely to surpass the deductible quickly and have the cost of their prescription drugs covered through the traditional pharmacy path.
Another huge disadvantage, is that there are only 100 generic drugs available on the website now, and there are no brand-name options available. Brand name drugs without generics available, are usually far more expensive, and rely on health plan reimbursements.
Seeing into the future
If MCCPDC can tackle the PBM and health plan relationship to be able to offer brand-name drugs or provide insurance coverage, we can expect a radical change to follow throughout the whole industry. For now, Cuban’s model will certainly help a lot of Americans afford generic prescription drugs, however it is limited by the number of drugs available and its cash-only model. In the meantime, for those that can’t take advantage of MCCPDC, there are companies like PharmacyChecker or GoodRx that can help people find the lowest price or rebate offers on prescription medications at traditional pharmacies.
- Olen H. Opinion: Can Mark Cuban help save the pharmaceutical industry from itself? February 2022, Washington Post. Available at: https://www.washingtonpost.com/opinions/2022/02/02/mark-cuban-cost-plus-drug-prices/. (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: https://www.kff.org/health-costs/issue-brief/americans-challenges-with-health-care-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: https://www.census.gov/library/publications/2021/demo/p60-274.html (accessed February 25, 2022).