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Mark Cuban's Cost Plus Pharmaceutical Company Continues to Revolutionize Generic Drug Pricing

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Mark Cuban’s Cost Plus Drug Company (MCCPDC) is once again making waves as it steadily raises its profile in the generic drug industry. With a growing customer base of over 1.5 million, the company is quickly becoming a major disruptor in generic drug pricing.

The company buys pharmaceuticals directly from manufacturers, bypassing middlemen to drive prices down dramatically. Soon it will also manufacture generic drugs – and possibly biosimilars as well – at a 22,000 square foot facility under construction near Dallas, Texas.

Last year, the MCCPDC launched an online pharmacy. The launch came just two months after the establishment of its Pharmacy Benefit Management (PBM) operation. Previously, MCCPDC was a registered pharmaceutical wholesaler for more than a year, but initially it only stocked a handful of drugs. It now offers more than 350 generic drugs at reduced prices.

For the consumer, the price of each drug includes a fixed markup of 15%, a pharmacy fee of $3 and a shipping fee of $5. The company’s website is fully transparent. It shows which drugs are available, the cost to patients and the markup. MCCPDC works with Truepill Pharmacy to fill prescriptions.

Currently, the company sells generic drugs, not branded ones. But brand name drugs account for the vast majority of pharmaceutical costs. Therefore, the MCCPDC will not yet make a substantial dent in overall drug spending. However, Cuban said he eventually wants to add branded drugs to the company’s product portfolio.

Additionally, the MCCPDC is considering adding insulin to the list of drugs the company sells and produces. Currently, a vial of insulin can cost an uninsured patient up to $95. The company intends to sell a 90-day supply of 12 vials for $170. However, it may take some time before insulin is available. As a biologic, insulin presents specific challenges with respect to follow-on products – biosimilars – and manufacturing itself. Maybe the company will license a biosimilar version of insulin. If he decides to produce insulin, he will undoubtedly encounter a complicated and expensive manufacturing process.

The business is particularly beneficial for those who are uninsured and for many people who have health insurance but are in the deductible phase – high-deductible schemes are increasingly the norm – and whose co-payments are particularly heavy. For many generic drugs, the co-payment may be higher than the actual price of the drug.

The company does not (yet) accept most health insurances. Most insured consumers who use the MCCPDC do not see their out-of-pocket payments for their insurance deductible or other gaps in their coverage. This implies that for prescription drugs not available in the Cuban online pharmacy – which represents the vast majority of drugs – the consumer will have to spend money out of pocket for products covered by the insurer before the insurance does not comes into force.

Nevertheless, Cuban society is aware of the problem and is certainly not averse to partnering with smaller insurers or Pharmacy Benefit Managers (PBMs). Indeed, in October, the MCCPDC announced a partnership with Capital Blue Cross. And in December, the firm announced a partnership with the PBM EmsanaRX. The partnership with insurers and PBMs will allow people to sign up for the discounts offered by the Cuban company and then have them count towards their deductible.

Clearly, partnerships with payers and PBMs extend the reach of the MCCPDC. One wonders if the MCCPDC will soon forge relationships with other unconventional PBMs, such as Capital Rx, that share a similar philosophy of transparent pricing. Both CapitalRx and MCCPDC believe that transparency is a missing element in the current US healthcare system, in which insurers and drugmakers negotiate rebates and other rebates behind closed doors, leaving end users in the dark. What sets these two companies apart is the ability to observe market inefficiencies caused in part by a lack of transparency, and then seek to correct those problems.

MCCPDC’s steady growth in the generics space is virtually assured to continue into 2023. However, as Mark Cuban’s company attempts to expand into new territories, such as insulin and biosimilars, and possibly brand-name drugs, the company will face obstacles. Disruptions in these areas will not be easy. Nevertheless, it would be foolish to assume that the MCCPDC will not be able to overcome entrenched barriers.

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