Mark Cuban started a company that offers generic versions of drugs at extremely low prices. A recent study calculated that Medicare could save billions with this business model.
why does it matter
Life-saving prescription drugs in the United States are often very expensive, especially for people without insurance.
Billionaire businessman Mark Cuban’s new company, which is less than six months old, is selling hundreds of commonly used generic drugs at absolutely massive cost cuts. And I mean massive. Reading the price tags will make your jaw drop.
The generic version of Actos — prescribed to patients with diabetes and typically sold for $74.40 at standard pharmacies — is available for $6.60, according to the website. The generic version of Apriso – prescribed for patients with gastrointestinal ailments and sold for $122.70 at standard pharmacies – retails for $36.60.
And that’s just a snippet. The Mark Cuban Cost Plus Drug Company drug book (yes, that’s the full name) is long. The drugs treat conditions ranging from mild migraines to acid reflux, cancer, and neurological disorders. It also sells generic versions of a variety of mental health medications, such as Wellbutrin, used to treat depression, and Adapin, sometimes prescribed for anxiety.
Overall, Cost Plus Drugs appears to operate in the name of combating some very pressing public health issues in the United States. “If you don’t have insurance or have a high deductible plan, you know that even the most basic drugs can cost a fortune,” Cuban said in the company’s mission statement.
“Every American should have access to safe and affordable medicines,” he adds, and “we also think it’s so important to introduce drug pricing transparency so patients know they’re getting a fair price.”
With regards to the latter, the Cost Plus Drugs website describes exactly what you might be wondering right now. How can drug prices be reduced?
The mechanics of CostPlus
It’s usually quite complicated as brand-name prescription drugs — such as Humira, intended for patients with Crohn’s disease, or the EpiPen, employed to treat severe allergic reactions on the spot — are priced.
There are many moving parts behind the scenes, involving the pharmaceutical and insurance companies themselves, to name just two. But ultimately, the cost of branded drugs reflects their demand.
This means that prices are not necessarily dictated by what it took for drug manufacturers to gather the ingredients and do the work to actually make the drug. And while the cost of research is sometimes used to justify high prices, a 2016 study found that “there is no evidence of an association between research and development costs and prices; instead, prices of prescription drugs in the United States are primarily based on what the market will support.”
For example, the EpiPen increased its price by 500% between 2007 and 2016, although this is definitely a more extreme example of such a shift.
Furthermore, when compared with global prescription drug prices, “there are many economic factors at work that drive the US to pay two to six times more for prescription drugs than other countries,” John Clark, an associate clinical professor at the College of Pharmacy and Pharmacy Services Director of Michigan Medicine, said in 2020. These factors are also hidden in the complex details of manufacturing drugs in the first place.
Cost Plus Drugs takes a very different approach from the norm.
First, the company aims to remove all the elusive complexities behind drug manufacturing. Second, it does not intend charge much more than the manufacturing costs.
“Every product we sell is priced the same,” Cuban said in the company’s mission statement. “Our cost plus 15% plus the pharmacy fee, if any.”
As an example, Cost Plus Drugs’ cost for albendazole is $26.08 per course, which is then increased by 15% for company costs to equal a total of $30. Add the $3 pharmacy fee. and you get a grand total of $33. That’s the final price, the company claims, not including shipping.
“We started this company as an effort to disrupt the pharmaceutical industry and do our best to end ridiculous drug prices,” Cuban said in his statement.
Medicare can save billions
Like many experts, researchers at Harvard Medical School were intrigued by this money-saving pharmaceutical effort — which is why they set out to quantify exactly how useful these low-cost drugs would be on a larger scale.
They conducted a study, published Monday in the Annals of Internal Medicine, to calculate how much money Medicare could have saved in a year if all generic drugs offered to patients came from Cost Plus Drugs instead of retail-priced drug companies. pattern.
In short, billions.
For 109 generic drugs sold by Cost Plus Drugs as of Feb. 8 this year, the research team identified pricing — including pharmacy dispensing and shipping fees — for the minimum and maximum quantities available for bulk sale. Minimum quantity referred to the count of 30 and maximum to the count of 90.
The team then researched Medicare Part D spending in 2020 for 89 of those 109 drugs. They left out 20 because these were the ones considered unmatched to parallel retail generic drugs to a close enough degree.
After adjusting all of the prices collected to remove any confounding variables, such as the cost of ingredients between 2020 and 2022, the team concluded that if Medicare bought generic drugs in the maximum amount provided by Cost Plus Drugs, it could save $USD. 3.6 billion in 77 of the 89 generic drugs. only in the year 2020. If Medicare bought them in the minimum quantity, it could have saved $1.7 billion on 42 of the 89 drugs.
The team also said this is a conservative estimate because since that analysis, Cost Plus Drugs has added more drugs. However, the study said, “our findings suggest that Medicare is overpaying for many generic drugs.”