Amazon’s RxPass Doesn’t Yet Really Compete With Mark Cuban’s Cost Plus Drug Company

Amazon is adding RxPass to its pharmacy footprint. Purportedly, it’s competing with Mark Cuban’s Cost Plus Drug Company (MCCPDC). But, limitations suggest it isn’t yet a real competitor.

By paying a monthly flat fee of $5 an Amazon Prime members can obtain as many generic drugs as they need, among an initial set of 50 medications indicated for conditions, such as high blood pressure, anxiety, and male pattern baldness. Amazon’s new initiative will operate within its existing pharmacy infrastructure and distribution channels.

Paying a low, flat cash rate for generics isn’t unprecedented. Walmart, among others, has such a program.

And, for two years Mark Cuban’s Cost Plus Drug Company (MCCPDC) has been making waves in the cash business for generic drugs. With a growing customer base of more than 1.5 million, the company is fast becoming a major disruptor in generic drug pricing. The company purchases pharmaceuticals directly from manufacturers, bypassing middlemen to substantially lower prices.

Compared to Amazon RxPass, each individual prescription purchased at MCCPDC is more expensive. However, the two programs are not entirely commensurate, making a direct comparison difficult. In the case of Amazon’s RxPass, for example, to qualify for the $5 per month you also have to pay $139 annually for a Prime membership. Additionally, you pay $5 regardless of whether you fill a prescription.

Also, MCCPDC has a wider selection of drugs available; 350 generic drugs and more than 1,000 products, if you include different dosages and formulations of unique drugs. Soon it will also manufacture generic drugs – and possibly biosimilars, too – at a 22,000 square foot plant which is being constructed near Dallas, Texas.

Furthermore, unlike RxPass, MCCPDC is open to Medicare and Medicaid beneficiaries. And, Amazon’s RxPass can’t be used in eight states. These include several big ones, like California, Texas, and Pennsylvania. The aggregate numbers of residents in the eight states account for about a third of the country’s population.

Moreover, what may prove to be a key distinguishing feature over time is that MCCPDC has begun partnering with insurers and pharmacy benefit managers. To illustrate, in 2023, Capital Blue Cross members will be able to use their insurance cards at MCCPDC’s online pharmacy. Integrating the discount program within existing insurance mechanisms represents an important step forward towards being a true disruptor.

Amazon pioneered the concept of selling approximately at or around cost to gain market share and eliminate competition. It’s been a master at doing this in many different areas. However, it will take much more to disrupt the generic drugs’ space than what Amazon RxPass is offering in its rather tepid initial attempt.