What’s wrong with Mark Cuban’s pharmacy?
Sarah was recently kicked out of her parents’ family insurance plan after turning 26. She’s on her own now, but she’s lucky: 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 in good health and does not go to the doctor often. Her only medical condition is ulcerative colitis, but she is in remission thanks to two medications that control inflammation: time-release mesalamine (Apriso) and mesalamine (Canasa). Since Sarah is now paying her deductible and premium, her outgoings are about to increase: a 3-month supply of Apriso and Canasa averages around $370 and $2,820, respectively.
Sarah wonders why her medications 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 reduce the cost of common drugs with the launch of his pharmacy, the Mark Cuban Cost Plus Drug Company (MCCPDC).
How does the MCCPDC work?
MCCPDC is an online pharmacy offering 100 affordable and life-saving generic drugs. Some of the MCCPDC drugs are 10 times cheaper than those sold elsewhere. The company achieves such savings by removing insurance plans and external intermediaries, known as Pharmacy Benefit Managers (PBMs), from the drug supply chain.
Traditional medicine supply chain
The drug supply chain is complex, containing multiple parties all negotiating to buy, sell, and offer discounts on drugs.
The drug manufacturer supplies drugs to a wholesaler who pays for this supply and distributes it to pharmacies that purchase it. Patients then pay the pharmacy for their medications if they have a co-payment or have not reached their deductible.
As money flows from consumers to the drugmaker, secret negotiations are going on in the background between PBMs, health plans, pharmacies, and drugmakers. These negotiations determine which drugs pharmacies will sell, which drugs are covered by health insurance plans, and the prices of those drugs. More importantly, these negotiations decide what rebates drugmakers will pay PBMs to have their drugs covered on health plan formularies. Negotiations between these actors are far from transparent and lead to higher drug prices.
MCCPDC Drug Supply Chain
The MCCPDC recognizes that negotiations between third-party PBMs and health plans result in increased drug costs. So the MCCPDC is removing third-party PBMs by making it a cash-only pharmacy – no health plans allowed.
Everything else, including the drug manufacturer, wholesaler and pharmacy, is under one roof, which means that the MCCPDC has full control over its drug supply chain and, therefore, prices. .
The MCCPDC is radically transparency regarding drug prices. Here’s how the company determines the cost of its drugs:
- Manufacturing costs (relatively cheap)
These fees make drugs remarkably cheaper than what people can currently spend with Assurance.
Who will benefit from the MCCPDC?
Uninsured or underinsured people are likely to benefit from the MCCPDC since they can purchase their (now cheap) medications with cash.
Additionally, those like Sarah, who rarely use health services, have a high deductible, and need their monthly medications to stay healthy, will benefit from the low drug costs offered by the MCCPDC. For example, if Sarah were to use the MCCPDC pharmacy for a 3 month supply of medication, she would save $1,751.18.
Who cannot benefit from the MCCPDC?
People who use health services frequently or have low deductibles will pay their deductibles at the beginning of the year. Thus, they may not see the cost savings that the MCCPDC offers, since insurance comes into play to cover health expenses. For example, a patient with congestive heart failure and kidney disease may see a doctor several times a month for checkups or diagnostic tests; the costs of these visits can quickly exceed the deductible, which means that insurance will cover prescription drug costs.
Will it be “disruptive”?
The MCCPDC business model is a breakthrough innovation insofar as it simplifies the drug supply chain and makes drugs more affordable. However, it will take some time for the industry to feel the impact of the MCCPDC disruption, as the company currently sells only 100 generic drugs and no brand name drugs.
Is the MCCPDC so unique?
GoodRx is the first company that comes to mind when I think of “affordable drugs”. While GoodRx also tackles the issue of price transparency, the two companies are fundamentally different. GoodRx does not touch the drug supply chain, but circumvents it by offering drug coupons and finding pharmacies that sell drugs for less. The MCCPDC, meanwhile, is tackling the drug supply chain head-on.
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. He will own the drug supply chain. Over time, the company will expand its offering of generic drugs and perhaps move into brand name drugs, which will be more difficult to offer at affordable prices. However, I am bullish on the MCCPDC and believe it will be the harbinger of new legislation and innovations to drive down drug prices in the United States.
Jared Dashevsky is a third-year medical student at Icahn School of Medicine at Mount Sinai in New York, and co-founder and content creator at Healthcare Huddle, a healthcare media company focused on simplifying industry news.