Medicare could save billions buying generics through prescription drug company Mark Cuban

The entrepreneur beats prices from supply chain wholesalers, PBMs, pharmacies and insurers.

Medicare Part D would have saved $3.6 billion if it had purchased 77 generic prescription drugs at the prices charged by billionaire entrepreneur Mark Cuban.

The results “suggest that Medicare is overpaying for many generic drugs,” said the study, “Potential Medicare Part D Savings on Generic Drugs From the Mark Cuban Cost Plus Drug Company,” or MCCPDC, published June 21 in the Annals of Internal Medicinea journal of the American College of Physicians.

The study suggested policy reforms that could make generic drugs more affordable.

“While direct-to-consumer private companies like the MCCPDC may offer savings to some patients on certain drugs, policy reforms that improve price transparency, increase competition for expensive generic drugs, prevent annual increases in prices and limit pharmacy and dispensing costs could increase the affordability of essential generic drugs for all Americans,” said the study, led by corresponding author Hussain S. Lalani, MD, MPH, of the Brigham and Women’s Hospital and Harvard Medical School in Boston.

Pay the middleman

The findings “highlight inefficiencies in the existing generic drug distribution and reimbursement system, which includes wholesalers, drug benefit managers, pharmacies and insurers,” the study said.

The researchers cited a study that estimated that the supply chain retains 64% of every dollar spent on generic drugs, compared to 25% of every dollar spent on brand name drugs before discounts. Generic drugs have lower ingredient and manufacturing costs than brand name drugs, so dispensing costs make up a larger share of the price.

The study noted that the MCCPDC sets prices at the cost of ingredients and manufacturing plus a 15% markup, a $3 distribution fee, and a $5 shipping fee.

He didn’t mention the current economy with skyrocketing drug and health care costs, mountains of patient medical debt, or the business goals of Cuban, the outspoken owner of the Dallas Mavericks NBA team and co-host of the ABC television show “Shark Tank”.

Cuban and MCCPDC co-founder Alex Oshmyansky launched the company in 2016 with a “commitment to providing radical transparency in how we evaluate our drugs,” according to its website.

“Our goal is for everyone to be able to pay for their medication. Everyone should know what it costs to manufacture their medicine. Everyone should feel that the price they paid for their medicine was fair,” the MCCPDC website said.

Price per pill

The MCCPDC sells 109 generic drugs. The study compared the prices this company and Medicare Part D spent on 89 of them; it excluded 20 with multiple dosage forms, such as cream and ointment, because the prices per ingredient were not comparable.

The researchers calculated prices in 2022 US dollars, with usage data based on 2020, the most recent Medicare data available.

Among the savings available for purchasing maximum quantities of drugs:

  • $1.9 billion for ingredients and manufacturing
  • $1.4 billion for shipping
  • $820 million for pharmacy fees
  • $402 million for the MCCPDC 15% margin

Savings were greater when purchasing drugs in larger quantities to minimize costs. Even purchasing the minimum quantities of drugs, Medicare would have saved $1.7 billion on 42 of 89 drugs. In this scenario, shipping would have cost $872 million and pharmacy fees would have cost $523 million, which would be a higher percentage of total expenses.

Top 10

The study included a table with the top 10 generic drugs with the highest estimated savings, along with drug name and dosage form; Medicare Part D vs. MCCPDC price by 90 points; estimated Medicare Part D expenses; and estimated MCCPDC savings:

  • Esomeprazole, oral capsule; $160 versus $17; $327 million in Medicare Part D spending; $293 million in estimated savings
  • Rosuvastatin, oral tablet; $39 versus $19; $469 million in Medicare Part D spending; $241 million in estimated savings
  • Aripiprazole, oral tablet; $187 versus $22; $263 million in Medicare Part D spending; $233 million in estimated savings
  • Duloxetine, oral capsule; $39 versus $9; $295 million in Medicare Part D spending; $226 million in estimated savings
  • Losartan-hydrochlorothiazide, oral tablet; $62 versus $14; $208 million in Medicare Part D expenses; $160 million in estimated savings
  • Ezetimibe, oral tablet; $59 versus $13; $198 million in Medicare Part D expenses; $153 million in estimated savings
  • Memantine, oral tablet; $50 versus $13; $187 million in Medicare Part D expenses; $141 million in estimated savings
  • Tizanidine, oral tablet; $35 versus $10; $194 million in Medicare Part D expenses; $141 million in estimated savings
  • Colchicine, oral tablet; $381 versus $25; $140 million in Medicare Part D spending; $131 million in estimated savings
  • Bupropion, oral tablet, extended release; $56 versus $16; $183 million in Medicare Part D expenses; $131 million in estimated savings

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