Study: Medicare could save $3.6 billion at Mark Cuban’s prices

A recent study found that Medicare could have saved $3.6 billion in 2020 on the costs of generic drugs if it had bought them at the same prices paid by the Mark Cuban Cost Plus Drug Co.

The study, published June 20 in Annals of Internal Medicine, compared prices for 89 generic drugs available with Cost Plus Drug Co. and Medicare Part D plans.

As reported by Becker’s Hospital Review, Cuban paid less for 77 of the 89 drugs. If Medicare Part D had paid the same prices, 37% of the $9.6 billion it paid in 2020 could have been saved.

With esomeprazole, a drug treating acid reflux heartburn, Medicare’s costs were $1.77 per pill, while the Cost Plus Drug Co. was paying 19 cents. The difference in Medicare’s costs would have been $293 million on that pill alone.

Cuban’s company launched in January with roughly 100 generic drugs and now sells more than 700. It charges a 15% profit margin along with a $3 pharmacy dispensing fee and a $5 shipping fee. It partners with Truepill, a national digital health platform, to fulfill the orders.

Cuban became a billionaire after selling his company, Broadcast.com, to Yahoo. He then became the owner of the Dallas Mavericks and one of the investors on the TV show “Shark Tank.”

He told “CBS Mornings” that he was trying to cut out the middlemen and buy directly from manufacturers. He said he planned to add name brand medications to his offerings.

“Look, I’m the luckiest guy in the world, and to be able to find something that can change people’s lives for the better, why wouldn’t I?” Cuban said. “My next dollar is not going to change my life, one way or the other. It’s not going to make a difference for my children, or their children, or their children… But to … be able to make medicine affordable, that’s a game changer.”

Ray Hanley, Arkansas Foundation for Medical Care president and CEO, said Cost Plus Drug Co. offers drugs at transparent prices while bypassing pharmacy benefit managers (PBMs), which are huge companies that manage prescription drug benefits for Medicare Part D, insurers and others. He said Cuban’s company would best serve uninsured people and those with high deductibles, which includes some people enrolled in Medicare Part D.

But Hanley said Cuban’s company only sells generic drugs, and at prices similar to those that can be found at big-box retailers and local pharmacies. However, it lacks the local pharmacist who can counsel the patient face-to-face about drug contraindications and other information.

“It’s essentially a mail-order pharmacy that doesn’t have any relationship or any meaningful relationship with the pharmacist,” he said. “It fragments the delivery system if somebody’s getting part of their pharmacy from mail-order and then part of it from a local pharmacy for the name brands and things he doesn’t handle.”

Medicare is prohibited by law from negotiating lower prices for drugs. Hanley said that’s the result of campaign contributions and lobbying efforts by the pharmaceutical industry.

“The fact that Medicare Part D is prohibited by law from negotiating prices is just nuts. It’s not like Medicare is flush with money,” he said. “They need every break they can get, and certainly if they could negotiate, they would get substantial discounts and perhaps be able to bring down premiums to folks on Medicare.”

U.S. Rep. Bruce Westerman, R-Hot Springs, said Medicare’s policies are a big part of the reason drug prices are so high. He said a government bureaucracy modeling a private sector innovation won’t produce good results.

Cuban’s company is “a lot more simple and a lot more transparent, and you don’t have some bureaucrat in D.C. trying to figure out what the federal government’s going to pay for a certain drug, which then all the insurance companies, they peg their plans off of that,” he said.

Westerman is an author and sponsor of the Fair Care Act, a health care reform proposal. Its components include health savings accounts allowing consumers to save pre-tax money in an account to pay for pharmaceuticals, other health care services, and a health care plan not tied to their employment.

Westerman said he started writing the Fair Care Act after Sen. John McCain’s dramatic thumbs-down vote in 2017 against repealing the Affordable Care Act, otherwise known as Obamacare. He said the goal is to lower costs, cover more Americans and cover pre-existing conditions.

He said meaningful health care legislation will have to be bipartisan because it cannot be done through budget reconciliation and will need 60 votes in the Senate to overcome a filibuster. He said he was given permission by Rep. Mike Thompson, D-Calif., to include language from one of his bills in the Fair Care Act. Thompson is not a sponsor of the act.

“The Fair Care Act has a lot of language in it that were bills proposed by Democrats, so getting the bipartisan support I think eventually will come because it’s definitely bipartisan ideas that are in the Fair Care Act,” Westerman said.

Westerman praised Cuban’s company, saying that “what we need is simplification of the system and not more bureaucratic complication.”

“He’s turning around and selling them very transparently at a fair price to consumers, and he’s boxing out the insurance companies, he’s boxing out the PBMs, and it’s a way just to basically connect consumers with the drug manufacturers, and he’s charging a small, transparent profit to take all these middle costs out that are causing drug prices to be so high,” he said.