By Jeanette Contreras
A new front just opened in the battle to lower drug prices, and serial entrepreneur and investor Mark Cuban is leading the charge.
His firm, the Mark Cuban Cost Plus Drug Company, is planning to sell deeply discounted generic medicines directly to patients — bypassing the insurance companies, pharmacy benefit managers, and other industry middlemen that currently pocket 51 cents of every dollar spent on pharmaceuticals.
It’s a brilliant yet simple model that could deliver huge savings to everyone struggling with high drug prices, especially for minorities and those with a rare disease. Ironically, the brash billionaire’s business plan could serve as inspiration for progressive lawmakers in Congress who are trying to reform our country’s broken healthcare system.
As a recent Commonwealth Fund report details, minority groups disproportionately suffer from a litany of health issues — from higher maternal mortality to elevated rates of chronic conditions like diabetes and hypertension.
There are several structural reasons for these inequities — including unequal access to lifesaving medications. According to the Kaiser Family Foundation, minority groups are significantly less likely than whites to have insurance. And a recent study found that nearly 50% of working-age people are inadequately insured — meaning they’re often on the hook for high deductibles. Minorities also have lower participation rates in the special tax-advantaged savings accounts that make high-deductible health insurance plans feasible.
This lack of access to high-quality health insurance is part of the reason that nearly one in four Americans finds it difficult to pay for medication.
Insurers compound this problem by hiring middlemen known as pharmacy benefit managers, or PBMs, to negotiate with drug companies for bulk discounts on medicines. These PBMs take a cut of those discounts and share the rest with insurers. But they rarely, if ever, share the savings with patients at the pharmacy counter.
Case in point: a new JAMA study revealed that as a generic hepatitis-B drug got significantly cheaper, PBMs and insurers pocketed the savings as they continued to charge patients on high-deductible plans an average of $133 per month — a hefty level of cost-sharing that forced more than half of patients to abandon their prescribed course of treatment.
Here’s where Mark Cuban’s disruptive model intervenes.
Since the Cost Plus Drug Company doesn’t work with insurers at all, it passes all negotiated savings directly to patients, with a flat 15% operations markup and a negligible pharmacy fee.
The savings are gargantuan. Imatinib, a generic chemotherapy drug, retails for $2,502.50 — but with Mark Cuban’s company? Just $17.10. Valganciclovir, an antiviral, goes from $1750.43 retail to $100.20. And potassium chloride, prescribed to more than 4.5 million Americans, drops from $975.77 retail to just $3.57.
In short, it’s a game-changer — especially for the disadvantaged folks who might rely on pricey medications to survive, have inadequate insurance, or struggle to pay the bills.
Congress can — and should — follow Cuban’s lead. After all, 83% of Americans say they want the government to lower drug prices. As the Democrats work to revive Build Back Better negotiations, an essential first step is cutting out the middlemen to save patients money.
For progressives, following a billionaire’s playbook might sound strange. But Cuban’s business model is the intervention that consumers need at the pharmacy counter.
Jeanette Contreras is Director of Health Policy at the National Consumers League. This piece originally ran in the International Business Times.
