Mark Cuban’s Cost Plus Drug Company Continues To Revolutionize Generic Drug Pricing

Mark Cuban’s Cost Plus Drug Company (MCCPDC) is making waves again, as it steadily raises its profile in the generic drugs sector. 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. 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.

Last year, MCCPDC launched an online pharmacy. The launch came just two months after its pharmacy benefit manager (PBM) operation was established. Previously, MCCPDC had been 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 discounted prices.

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

At this point in time, the company sells generic and not branded drugs. But, branded drugs account for the vast majority of pharmaceutical costs. Hence, MCCPDC won’t yet make a substantial dent in overall drug spending. However, Cuban said he wants to eventually add brand-name drugs to the company’s portfolio of products.

Also, MCCPDC is considering adding insulin to the list of drugs the company sells and produces. At present, one vial of insulin can cost an uninsured patient as much as $95. The firm intends to sell a 90-day supply of 12 vials for $170. It may take awhile, however, before insulin becomes available. As a biologic, insulin presents specific challenges with respect to follow-on products – biosimilars – and manufacturing itself. Perhaps the company will in-license a biosimilar version of insulin. If it decides to produce insulin, it will undoubtedly encounter a complicated and expensive manufacturing process.

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

The company doesn’t (yet) accept most health insurance. Most insured consumers who make use of the MCCPDC do not have their out-of-pocket costs count towards their insurance deductible or other gaps in their coverage. This implies that for prescription drugs not available at Cuban’s online pharmacy – which is the vast majority of drugs – the consumer will have to spend money out of pocket on products the insurer covers before insurance kicks in.

Nonetheless, Cuban’s company is aware of the issue and certainly not against partnering with insurers or smaller pharmacy benefit managers (PBMs). Indeed, in October, MCCPDC announced a partnership with Capital Blue Cross. And in December, the firm announced a partnership with the PBM EmsanaRX. Partnering with insurers and PBMs will allow people to sign up for discounts offered by Cuban’s company and have these then count towards their deductible.

Obviously, the partnerships with payers and PBMs extend MCCPDC’s reach. One wonders whether MCCPDC will soon forge relationships with other unconventional PBMs, such as Capital Rx, that share a similar philosophy regarding transparent pricing. Both CapitalRx and MCCPDC believe that transparency is a missing component within the current U.S. healthcare system, in which insurers and drug manufacturers negotiate rebates and other discounts behind closed doors, leaving end-users in the dark. What distinguishes these two firms from others is the ability to observe market inefficiencies caused in part by a lack of transparency, and then seek to correct these problems.

It’s practically assured that the steady growth of MCCPDC in the generics space will continue in 2023. However, as Mark Cuban’s company attempts to expand into new territory, like insulin and biosimilars, and eventually branded drugs, the firm will face obstacles. Disruption in these areas won’t be easy. Nonetheless, it would be folly to assume that MCCPDC won’t be able to overcome the entrenched barriers.