Mark Cuban’s Cost Plus Drug Company continues to revolutionize generic drug pricing

Mark Cuban’s Cost Plus Drug Company (MCCPDC) is making waves again as it steadily raises its profile in the generics space. With a growing customer base of more than 1.5 million, the company is quickly becoming a major disruptor in generic drug pricing.

The company buys pharmaceutical products directly from manufacturers, bypassing middlemen at significantly lower prices. It will soon also produce generic drugs — and possibly biosimilars — in a 22,000-square-foot plant being built near Dallas, Texas.

Last year, MCCPDC launched an online pharmacy. The launch comes just two months after the pharmacy benefit management (PBM) operation was established. Previously, MCCPDC had been a registered pharmaceutical wholesaler for over a year, but initially only stocked a handful of medicines. It now offers more than 350 generic drugs at reduced prices.

For the consumer, the price of each drug includes a flat 15% markup, a $3 pharmacy fee, and a $5 shipping fee. The company’s website is completely transparent. It shows which drugs are available, the cost to patients and the surcharge. MCCPDC partners with Truepill Pharmacy to fill prescriptions.

Currently, the company sells generic rather than brand-name drugs. But brand-name drugs account for the vast majority of pharmaceutical costs. Therefore, MCCPDC will not yet make a significant reduction in total drug expenditure. However, Cuban said he eventually wants to add brand-name drugs to the company’s product portfolio.

MCCPDC is also considering adding insulin to the list of drugs sold and manufactured by the company. Currently, a vial of insulin can cost an uninsured patient as much as $95. The company plans to sell a 90-day supply of 12 vials for $170. However, it may take some time for the insulin to become available. As a biologic, insulin presents specific challenges with respect to subsequent products – biosimilars – and production itself. Perhaps the company will license a bio-identical version of insulin. If it decides to produce insulin, it will undoubtedly face a complicated and expensive production process.

The company is especially beneficial to the uninsured and many people who have health insurance but are in the discount phase — high-deductible plans are increasingly the norm — and whose co-payments are especially burdensome. For many generic drugs, the copayment may be higher than the actual price of the drug.

The company does not (yet) accept most health insurances. Most insured consumers using the MCCPDC do not factor out-of-pocket costs into their deductible or other gaps in their coverage. This means that for prescription drugs that are not available in Cuba’s online pharmacy – which is the vast majority of drugs – the consumer will have to spend money out of pocket on products covered by the insurer before the insurance kicks in.

Still, Cuban’s company is aware of the issue and certainly isn’t against partnerships with insurance companies or smaller pharmacy benefit managers (PBMs). Indeed, in October, MCCPDC announced a partnership with Capital Blue Cross. And in December, the company announced a partnership with PBM EmsanaRX. Working with insurers and PBMs will allow people to sign up for discounts offered by the Cuban company and then count toward their discount.

Clearly, partnerships with payers and PBMs are expanding MCCPDC’s reach. One wonders if MCCPDC will soon forge relationships with other unconventional PBMs, such as Capital Rx, that share a similar philosophy on transparent pricing. Both CapitalRx and MCCPDC believe transparency is a missing element in the current U.S. health care system, in which insurers and drugmakers negotiate rebates and other discounts behind closed doors, leaving end users in the dark. What distinguishes these two companies from others is the ability to notice market inefficiencies caused in part by a lack of transparency and then seek to correct those problems.

It’s virtually certain that MCCPDC’s steady growth in generics will continue into 2023. However, as Mark Cuban’s company looks to expand into new territory, such as insulin and biosimilars, and eventually brand-name drugs, the company will face obstacles. Disruption in these areas will not be easy. However, it would be foolish to assume that the MCCPDC will not be able to overcome entrenched obstacles.

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