Billionaire Mark Cuban aims to disrupt the pharmaceutical industry with a new digital venture offering more affordable generic drugs to patients across the country.
In January, the Dallas Mavericks owner launched the Mark Cuban Cost Plus Drug Company. This online pharmacy sells 100 different prescriptions for various diseases and disorders, including cancer, depression, and high cholesterol.
The company says it has “cut out the middlemen” and negotiates directly with drugmakers to keep prices low. The unorthodox model results in savings worth anywhere from a few dollars to thousands on each prescription.
“Given the distortions in the industry, I thought there was a real opportunity to have an impact,” Cuban said in an email to the Washington Examiner.
The company’s launch is the latest in a trend of digital startups seeking to improve access to medicine and care within America’s profit-driven health infrastructure.
Cuban’s foray into the massive U.S. pharmaceutical industry is also the latest in a series of forward-looking business ventures that have helped build his fortune over the last two decades. The Pittsburgh native made a significant portion of his money in the dot-com era of the late ’90s by selling an online video service he co-founded for $5.7 billion in Yahoo! stock.
Cuban said the idea for a pharmacy came about four years ago, when Alex Oshmyansky, now the CEO of Cost Plus, contacted him with ideas, and their conversations “evolved into creating […] a vertically integrated provider of drugs at the lowest possible price.”
So far, the new pursuit has been met with positive reactions online, with Cuban sharing a constant stream of praise from doctors and patients on Twitter. Dr. Michelle Heyland, a psychiatric nurse practitioner and associate professor at Rush University, tweeted that Cost Plus was “truly a life saver” for a patient with major depressive disorder and “limited funds for her meds.”
But there have been “growing pains,” Cuban acknowledged to the Washington Examiner, as Twitter users also messaged the company about problems with the website and delays in receiving their medications. “We have only been online for two weeks. And if you look at any tweets, we respond directly to them,” Cuban said.
Still, the launch has seen “far, far more” people sign up for Cost Plus than expected, Cuban said, declining to specify how many.
He said he hopes the new business will help curb inflation in an industry notorious for sky-high prices that prevent many from getting the lifesaving medicines they need.
A Gallup poll released in September found that 7% of adults in the U.S., or approximately 18 million people, couldn’t afford at least one prescription. Gallup found the problem is even more pronounced in lower-income households, with the number jumping to 19% for households earning less than $24,000 per year. Meanwhile, drug companies increased list prices for hundreds of medications by about 5% in January, MarketWatch reported.
“If you don’t have insurance or have a high deductible plan, you know that even the most basic medications can cost a fortune,” Cuban says on Cost Plus’s website. “If you are fortunate enough to have health insurance with a low deductible, the high cost of drugs is driving up the premiums that you or your employer pay, making getting health insurance expensive and challenging.”
Cuban says Cost Plus “takes these problems head-on.” According to a press release, the company is a registered pharmaceutical wholesaler, which allows it to “bypass middlemen and outrageous markups.”
Those middlemen, known as pharmacy benefit managers, negotiate drug prices with manufacturers on behalf of insurance companies but have been criticized for their lack of transparency. Cuban’s company has also created its own pharmacy benefit manager to help keep prices down.
“There are numerous bad actors in the pharmaceutical supply chain preventing patients from getting affordable medicines,” Oshmyansky said in the press release. “The only way to ensure affordable prices get through is to vertically integrate.”
Cost Plus charges patients the wholesale cost of the drug and a flat 15% markup, plus a $3 pharmacy fee and the cost of shipping — and no membership costs. As a result, the company can cut the price of several commonly used medicines, including a pricey drug used to treat leukemia.
The retail price of 30 tablets of imatinib, the generic for Gleevec, is listed as high as $10,000 in some places or can be found on GoodRx, another online pharmacy company, for about $120 with coupons. Cuban’s site lists the price at $47.
For mesalamine, a generic suppository used to treat ulcerative colitis, patients pay just over $30 for a one-month supply with Cost Plus, compared to an average $900 retail price tag. The company also offers several medicines used to treat anxiety disorders, depression, and schizophrenia, such as sertraline (Zoloft), bupropion (Wellbutrin), and aripiprazole (Abilify).
“The biggest difference is most companies, particularly in the drug industry, are built to optimize profits and sales,” Cuban, who’s worth an estimated $4.5 billion, said recently on The View. “We’re not. I’ve got enough money. I’m the luckiest guy in the world. I really wanted to do something that had an impact.”
According to John Clark, an associate professor of pharmacy at the University of Michigan, what makes Cost Plus different from other companies is that it offers only generic drugs and doesn’t accept insurance. “Most pharmacies offer a combination of branded and generic products and process the prescriptions through the patient’s insurance company,” Clark said in an email to the Washington Examiner. “This venture requires the patient to pay cash only, which is unusual in U.S. healthcare.”
Cost Plus says it “refuses to pay spread prices to third-party PBMs in order to be allowed to process insurance claims” but that “its model means patients can immediately purchase a broad array of medications at prices often less than what most insurance plans’ deductible and copay requirements would total.”
Clark said the setup isn’t without its downsides since patients often take a combination of brand-name and generic medications, and it’s better when possible for patients to use just one pharmacy for all their prescriptions.
“If you receive the medications from the same pharmacy, the pharmacist and automated computer checking software can assist with drug-drug interaction checking,” Clark said. “Checking of this type cannot be done over multiple pharmacies and multiple computer systems. Drug-drug interactions occur when one medication increases or decreases the effectiveness of another medication. This venture focuses only on the generically available medications and no brand name medications, so many patients will need to continue to use another pharmacy.”
Clark said “many economic factors” contribute to high drug prices in the U.S. “The U.S. pays for significant amounts of the research and development costs for medications for the world,” he said. American pharmaceutical companies also “pay as much in direct-to-consumer advertising than they do in research and development.” Moreover, patent lawsuits that delay generic drugs from becoming available keep prices high.
Another critical reason for elevated prices is the “lack of transparency in pricing and information from drug companies, PBMs, and insurers,” Clark said, something at which Cuban and his company have aimed with their flat-rate pricing structure. The goal of Cost Plus is to offer cheaper medications, “but we also think that it is just as important to introduce transparency to the pricing of drugs, so patients know they are getting a fair price,” Cuban says on the company website.
Cuban told the Washington Examiner that the drugs on Cost Plus’s current list of available medications were chosen based on the “most widely prescribed generics” available to the company. “We thought this would maximize the savings we could create for patients who had challenges affording their meds.”
Several people on Twitter have asked whether Cost Plus will soon offer insulin, which is used in the treatment of diabetes and has become increasingly expensive in recent years.
“Like any drug, if we are able to find a source that allows us to be the low-cost provider, we will offer it as we are able,” Cuban said.
More broadly, there are plans to expand the list of Cost Plus’s available drugs significantly to include thousands of generic medicines, Cuban said. The company is building its own $11 million manufacturing facility in Dallas, Texas, to reduce costs further. “Our hope is that we can announce price cuts every month and hopefully every week,” Cuban said.
