What is happening
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 is it important
In the United States, life-saving prescription drugs are often too expensive, especially for people without insurance.
Billionaire entrepreneur Mark Cuban’s new company, which launched publicly in January, sells hundreds of commonly used generic drugs at absolutely massive cost reductions. And I mean massive.
The generic version of Actos – prescribed for diabetic patients and typically sold for $74.40 at standard pharmacies – is available for $5.40 for 30 pills, according to the website. The generic version of Apriso – prescribed for patients with gastrointestinal illnesses and sold for $122.70 in standard pharmacies – costs $36.60 for 30 tablets.
And that’s just an excerpt. The Mark Cuban Cost Plus Drug Company’s drug registry (yes, that’s the full name) is long. The drugs treat conditions ranging from mild migraines and acid reflux to cancer and neurological disorders. Cost Plus Drugs also sells generic versions of a variety of mental health drugs like Wellbutrin, used to treat depression, and Adapin, sometimes prescribed for anxiety.
Overall, Cost Plus Drugs appears to be operating in the name of addressing a few 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 medications 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 believe it is equally important to introduce transparency into drug pricing so patients know they get a fair price”.
As for the latter, the Cost Plus Drugs website outlines precisely what you might be wondering right now. How can drug prices be reduced?
The mechanics of Cost Plus
Typically, the price of prescription drugs — like Humira, for patients with Crohn’s disease, or the EpiPen, used to treat severe allergic reactions on the spot — is quite complicated.
There are a lot of moving parts behind the scenes, involving the pharmaceutical companies themselves and insurers, to name just two. But ultimately, the cost of the drugs reflects its demand.
This means that the prices are not necessarily dictated by what it took for the drug makers to gather the ingredients and do the work necessary to manufacture the drug. And although 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; On the contrary, prescription drugs are priced in the United States primarily on the basis of what the market will bear.”
For example, EpiPen increased its price by 500% between 2007 and 2016, although this is certainly a more extreme example of such a change.
Additionally, relative to global prescription drug prices, “there are many economic factors that cause the United States to pay two to six times more for prescription drugs than other countries,” John Clark, associate professor of clinic at the College of Pharmacy and Director of Pharmacy Services at Michigan Medicine, said in 2020. These factors are also hidden in the complex ins and outs of drug manufacturing in the first place.
Cost Plus Drugs takes quite a different approach to the norm.
First, the company aims to eliminate all the elusive complexities behind drug manufacturing. Second, he doesn’t hear charge much more than manufacturing costs.
“Every product we sell has the same price,” Cuban said in the mission statement. “Our cost plus 15%, plus pharmacy fees, if any.”
As an example, the Cost Plus Drugs cost for albendazole, which treats tapeworms, is $26.08 per course, which is then marked up by 15% to bring the company’s costs to a total of $30. Add the $3 pharmacy fee and you get a grand total of $33. That’s the final price, the company says, not including shipping.
And, according to Cuban, the company also has a second method to keep costs as low as possible: Cost Plus Drugs does not intend to spend money on marketing, but rather rely on word-of-mouth. by ear.
“We created this company with the goal of disrupting the pharmaceutical industry and doing our best to end ridiculous drug prices,” he said in his statement.
Medicare could save billions
Like many experts, the Harvard Medical School researchers were intrigued by this ultra-low-cost pharmaceutical company — which is why they decided to quantify exactly how useful these low-cost drugs would be on a larger scale.
They conducted a study, published in June in the Annals of Internal Medicine, to calculate how much money Medicare could have saved in a year if all the generic drugs they offered to patients came from Cost Plus Drugs instead of pharmaceutical companies. with standard retail prices.
In short, billions.
For 109 generic drugs sold by Cost Plus Drugs on February 8 this year, the research team identified the price – including pharmacy dispensing and shipping costs – for the minimum and maximum quantities available for sale. in bulk. Minimum quantity referred to 30 units and maximum to 90 units.
Next, the team researched Medicare Part D spending in 2020 for 89 of those 109 drugs. They omitted 20 because they are the ones that are deemed to be incomparable to parallel generic drugs sold at retail to a sufficiently close degree.
After adjusting all prices collected to remove any confounding variables, such as the cost of ingredients between 2020 and 2022, the team concluded that if Medicare had purchased generic drugs in the maximum quantity provided by Cost Plus Drugs, it could have saved $3.6 billion on 77 of 89 generic drugs. in 2020 only. If Medicare had purchased them in minimum quantities, it could have saved $1.7 billion on 42 of the 89 drugs.
The team also said this was a conservative estimate because since that analysis, Cost Plus Drugs had added a bunch of additional drugs. Nevertheless, according to the study, “our results suggest that Medicare overpays for many generic drugs.”