What’s the Deal With Mark Cuban’s Pharmacy?

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Sarah was recently booted off her parents’ family insurance plan after turning 26. She’s on her own now, but is in luck: the software company she works for offers decent health insurance, with an annual premium of $7,739 and a deductible of $1,945.

Sarah is healthy and doesn’t frequently go to the doctor. Her only health condition is ulcerative colitis, but she’s in remission with the help of two medications that control inflammation: mesalamine extended release (Apriso) and mesalamine (Canasa). Since Sarah now pays for her deductible and premium, her out-of-pocket expenses are about to jump: a 3-month supply of Apriso and Canasa cost on average around $370 and $2,820, respectively.

Sarah wonders why her meds are so expensive. Billionaire entrepreneur Mark Cuban wonders the same thing. He is looking for a solution by tackling the drug supply chain head-on. He aims to lower the cost of common medications with the launch of his pharmacy, the Mark Cuban Cost Plus Drug Company (MCCPDC).

How Does MCCPDC Work?

MCCPDC is an online pharmacy offering 100 affordable, life-saving generic drugs. Some of MCCPDC’s drugs are 10 times cheaper than those sold elsewhere. The company achieves such cost savings by removing insurance plans and outside middlemen, known as pharmacy benefit managers (PBMs), from the drug supply chain.

Traditional Drug Supply Chain

The drug supply chain is complex, containing multiple parties who all negotiate to purchase, sell, and provide rebates for drugs.

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The drug manufacturer supplies drugs to a wholesaler who pays for that supply and distributes it to pharmacies that purchase it. Patients then pay the pharmacy for their meds if they have a copay or haven’t met their deductible.

While money flows from consumers up to the drug manufacturer, secret negotiations go on in the background between PBMs, health plans, pharmacies, and drug manufacturers. These negotiations decide which drugs that pharmacies will sell, which drugs that health plans will cover, and the prices of those drugs. Most importantly, these negotiations decide on the rebates that drug manufacturers will pay to PBMs for getting their drugs covered on health plans’ formularies. Negotiations between these players are far from transparent and lead to rising drug prices.

MCCPDC Drug Supply Chain

MCCPDC recognizes that the negotiations between third-party PBMs and health plans lead to inflated drug costs. So, MCCPDC cuts out third-party PBMs by making this a cash-only pharmacy — no health plans allowed.

Everything else, including the drug manufacturer, wholesaler, and pharmacy, is under one roof, meaning MCCPDC has complete control over its drug supply chain and, therefore, pricing.

Transparency

MCCPDC is radically transparent when it comes to drug pricing. Here’s how the company determines the cost of its drugs:

  • Manufacturing costs (relatively inexpensive)
  • $3 pharmacy labor fee
  • 15% markup
  • $5 shipping

These charges make the drugs remarkably less expensive than what people may currently be spending with insurance.

The Impact

Who will benefit from MCCPDC?

Uninsured or underinsured individuals will likely benefit from MCCPDC since they can purchase their (now cheap) meds with cash.

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Additionally, those like Sarah, who seldom use healthcare services, have a high deductible, and need their monthly meds to keep healthy, will benefit from the low drug costs that MCCPDC offers. For example, if Sarah were to use MCCPDC’s pharmacy for a 3-month supply of meds, she would save $1,751.18.

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Who may not benefit from MCCPDC?

Individuals who frequently utilize healthcare services or have low deductibles will meet their deductibles early in the year. So, they may not get to see the cost savings MCCPDC offers, since insurance kicks in to cover healthcare expenses. For example, a patient with congestive heart failure and kidney disease may be visiting a doctor multiple times a month for checkups or diagnostic testing; the costs of those visits may quickly surpass one’s deductible, meaning insurance will cover the costs of prescription drugs.

Will this be ‘disruptive’?

MCCPDC’s business model is a disruptive innovation in that it makes the drug supply chain simpler and medications more affordable. However, it will take some time for the industry to feel the impact of MCCPDC’s disruption, since the company only sells 100 generic drugs right now and no brand-name drugs.

Is MCCPDC That Unique?

GoodRx is the first company to come to mind when I think of “affordable medications.” While GoodRx also tackles the price transparency problem, the two companies are fundamentally different. GoodRx doesn’t touch the drug supply chain but instead works around it by offering drug coupons and finding pharmacies that sell cheaper drugs. MCCPDC, on the other hand, tackles the drug supply chain head-on.

Looking Ahead

Soon, MCCPDC will act as a PBM for health plans, a manufacturer for its wholesaler, a wholesaler for its pharmacy, and a drug retailer for its customers. It will own the drug supply chain. As time goes on, the company will expand its generic drug offerings and perhaps step into brand-name drugs, which will be more challenging to offer at affordable prices. However, I’m bullish on MCCPDC and think it will be the harbinger of new legislation and innovation to lower drug prices in the United States.

Jared Dashevsky is a third-year medical student at the Icahn School of Medicine at Mount Sinai in New York City, and cofounder and content creator at Healthcare Huddle, a healthcare media company focused on simplifying industry news.

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