Medicare could have saved $3.6 billion in a single year if it had bought generic drugs from Mark Cuban’s online pharmacy, according to a Harvard University report.
In the report published this week in Annals of Internal Medicine, researchers from Brigham’s and Women’s Hospital with the Harvard Medical School made major claims that Medicare wastes money in the way it buys drugs.
Their report estimates the annual Medicare Part D spending on 89 generic drugs is $9.6 billion under the current purchasing model where the government is prohibited from buying drugs directly from manufacturers.
“If Medicare purchased generic drugs in the maximum quantity supplied by [Mark Cuban Cost Plus Drug Co.], it could have saved $3.6 billion on 77 of 89 generic drugs,” said the study, which notes the savings came from cutting out drug distributors.
Cuban, the billionaire owner of the Dallas Mavericks and celebrity investor on ABC’s Shark Tank, pushed into the pharmaceutical industry at the beginning of this year with Cost Plus Drug. The direct-to-consumer pharmacy buys generic drugs from manufacturers and sells them to consumers at the cost of ingredients with a 15% markup for acquisition, a $3 fee for labor and a $5 fee for shipping.
Cost Plus Drug sells more than 700 generic prescription drugs and does not yet accept insurance, emphasizing its accessibility to everyone.
“Our goal is to be the low-cost provider to anyone with a prescription from their doctor,” said Cuban in an email exchange with The Dallas Morning News. “We will work with anyone.”
A different report from Brigham and Women’s Hospital Harvard Medical School researcher Benjamin Rome, co-author of the Cost Plus Drug research, showed that the average price of new brand-name drugs has increased 20% a year from 2008 to 2021. These drugs receive governmental periods of monopoly protection where the manufacturers can set prices. Rome said it’s when protections end that generic competition can begin and prices can fall.
“We know generic [drugs] result in tremendous savings for patients and our health care system,” Rome said. “But what is clear from our new study is that even when drugs face generic competition, there are inefficiencies in the supply chain that sometimes lead Medicare to overpay for these drugs.”
Companies like Good Rx have emerged to try and mitigate high drug prices by helping consumers find the cheapest place to buy their medication, but they don’t break out of the supply chain model that leaves pricing up to insurance companies and name-brand manufacturers.
Cuban’s company circumvents the entire system.
Atorvastatin, a drug commonly prescribed for high cholesterol, is the active ingredient in the name-brand drug Lipitor. On the Cost Plus Drug site, the retail price for 30 tablets at the lowest dose is listed as $55.08. Cost Plus Drugs is offering the same amount for $3.60, without insurance. In 2018, nearly 35 million Americans were taking some form of statin for high cholesterol, making the drug family one of the most prescribed in the United States.
Alex Oshmyansky, CEO of Cost Plus Drug, said it’s opening its services to commercial payers in the next three to six months and might be able to let patients use their insurance on the company’s site by later this year, meaning Medicare recipients could also use the service.
“The important part is when we work with insurance companies effectively as an employee benefit ... it will be on our terms,” Oshmyansky said. “The same price that is on our website is the price that the payer, be that a large insurance company or a large self-insured employer, is the same price that everyone would pay. Certainly in that context, we would be able to work with Medicare Part D plans as well.”
Hussain S. Lalani, lead author of the report and researcher at Harvard’s Program on Regulation, Therapeutics and Law, completed his residency in internal medicine at UT Southwestern Medical Center in 2021 before beginning an internal medicine fellowship at Brigham and Women’s Hospital.
“I was struck by the paradoxical disparities in access to affordable medicines that I witnessed as an internal medicine physician in Dallas from 2018 to 2021,” Lalani said.
He explained that some of his low-income patients in Dallas could receive state-of-the-art medicine at little to no cost with financial assistance from Parkland while his elderly patients on Medicare were stuck with large out-of-pocket costs for name-brand drugs.
“This is the paradox of health insurance design,” he said.
Texas was the third-highest state in Medicare spending in 2019, totaling $28.5 billion statewide, following Florida ($28.6 billion) and California ($41.1 billion), according to data from the Kaiser Family Foundation.
Mark Cuban Cost Plus Drug Co. “is most likely to help Texans without health insurance who do not have access to affordable prescription drugs through local county hospitals,” Lalani said. “It also may help underinsured Texans who have a high-deductible health plan.”
While the Harvard report didn’t specify Medicare spending by state, the $3.6 billion in savings could apply to the 14% of the state population currently enrolled in Medicare. Medicare Part D plan premiums in Texas ranged from $7 to $155 a month in 2021, but a service like Cost Plus Drug could eliminate the need for 1.65 million Medicare beneficiaries in Texas to use standalone Medicare Part D plans.
Cost Plus Drug is also building a 22,000-square-foot plant in Dallas’ Deep Ellum neighborhood to manufacture its own generic drugs. By manufacturing drugs on the Food and Drug Administration’s shortage list in the United States, Oshmyansky said prices could be reduced even more than they are now.
The company will “pass along the savings at every step to the patient at the end of the day,” he said.
