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Can Mark Cuban Help You Pay Less for Prescription Drugs?

Can this guy lower drug prices?
Can this guy lower drug prices? (Photographer: Elsa/Getty Images)
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Billionaire investor Mark Cuban, the owner of the Dallas Mavericks, is pushing back on high U.S. drug prices. He’s put his name on a venture that aims to lower retail spending on generic medicines. And his novel approach just might work — if he can get consumers to cooperate.

The Mark Cuban Cost Plus Drug Company soft-launched a year ago with just one product, and has recently rolled out 99 more. Many of these are commonly prescribed generic medicines with prices just a few dollars lower than at the local pharmacy. But a handful are offered at savings of hundreds to thousands of dollars.

Cost Plus is doing this by cutting out the drug industry’s so-called middle men, the pharmacy benefit managers, and buying directly from manufacturers. It then sells the medicines at their cost plus 15%, and a $3 pharmacy fee. The site doesn’t accept insurance, so customers have to pay out of pocket.

In Cuban’s ideal world, consumers would go straight to Cost Plus for generic medicines — which in total are 90% of the drugs Americans take — passing up their insurers’ discounts at ordinary pharmacies. But will people do this in the real world?

Cost Plus faces a few not-so-insignificant hurdles. The first is the need to educate consumers about the program and persuade them to comparison shop. Cuban’s star power helps with publicity; already, sports and technology media have heralded the billionaire coming in to fix health care.

Getting consumers to try Cost Plus could be tougher. One problem is that the company sells only generic drugs, and only 100 of them at that, so consumers will still have to go elsewhere for all the other medicines they take. Unless the savings are substantial, it might be easier for many people to keep getting everything from their neighborhood CVS or Costco.

The company’s piecemeal approach — aimed at one corner of the drug marketplace — has been taken before by various startups that have tried to lower prices. Such programs tend to be great for savvy consumers who have the time and energy to price shop, but less helpful for the many who don’t.

The potential savings can be tricky to calculate. For anyone without insurance, buying the cheapest drug available is a no-brainer. But for the insured, there are complications, because payments to Cost Plus don’t count toward a beneficiary’s deductible. For someone with a low-deductible or no-deductible plan, the discount might not be enough to make it worthwhile.

The 45% of insured Americans enrolled in high-deductible plans could see immediate savings, says Risha Gidwani, a health economist at the RAND Corporation. But if someone faces a big bill for a health-care service — say, an MRI — she or he won’t have worked down any of the deductible through drug spending. A sizeable payment like that can be a real burden, considering that 40% of Americans say they don’t have enough money on hand to cover a $400 emergency expense.

One way Cuban’s company can improve its prospects is by expanding its product portfolio so that it becomes easier for consumers to get more of what they need in one place. Alex Oshmyansky, the chief executive officer of Cost Plus, says the company is working on this. His goal is to be selling 2,000 generic drugs by the end of this year.

It would also be smart to focus on the products whose prices have become most dysfunctional: drugs that have been generic for years but, due to limited suppliers or perverse incentives, remain outlandishly expensive. A prime example is imatinib, the generic version of the blood-cancer medicine Gleevec. Cost Plus charges $17.10 for a month’s supply of imatinib, which it says normally retails for $2,485.

Even though that price doesn’t reflect what many insured consumers actually pay, anyone’s savings stand to be substantial. Stacie Dusetzina, who studies drug policy and prices at Vanderbilt University, focused on this drug as part of her study on why Medicare Part D was not saving patients money. Even though, by 2018, multiple generic manufacturers were offering imatinib, she found that in 2020 most patients paid $6,352 annually out of pocket. “You can see why the cancer policy people were so stunned at the $17 price,” she says.

You can also see why other doctors, from gynecologists to oncologists, have been weighing in on social media with lists of generic drugs they’d like to see sold by Cost Plus.

Because high generic prices are sometimes driven by manufacturers, rather than middle men, the company also plans to make some products itself. The company is building a sterile fill and finish facility for producing injectable drugs. Oshmyansky says the site should be completed by June and operational by October or November.

Cuban’s venture isn’t the first health-care startup to focus on lowering prices of generic drugs. CivicaRx, a nonprofit that debuted in 2018, has partnered with hospital systems to try to tame the medicines’ wild price fluctuations. Now this company is working with a health insurer on plans to bring some treatments directly to consumers.

Cost Plus could benefit from building similar partnerships with existing health-care businesses. Cooperation from insurers, for example, may be needed if Cuban is ever to expand into brand-name drugs. Consumers simply can’t afford to pay out of pocket for these exorbitantly priced products.

Whether or not Cost Plus itself directly helps lower U.S. drug costs, it may help consumers merely by trying — and adding to the pressure on drug makers to set more reasonable prices.

More from other writers at Bloomberg Opinion:

• How to Rein In Skyrocketing Drug Prices: Editorial

• Slapping Around Martin Shkreli Won’t Cut Drug Prices: Joe Nocera

• $600 or $3,120? Gilead Puts a Price Tag on Covid-19 Relief: Timothy O’Brien

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lisa Jarvis, the former executive editor of Chemical & Engineering News, writes about biotech, drug discovery and the pharmaceutical industry for Bloomberg Opinion.

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