Mark Cuban's Drug Company Could Save Medicare Billions

The new company uses a simple approach to provide lifesaving drugs to consumers at radically discounted prices.

Mark Cuban's online pharmacy was founded to sell prescription drugs at the lowest and most transparent prices possible. As Cuban recently told PBS News Weekend, when it comes to medication, "the reality is the only number that matters is cost. What can we as the retailer or the distributor, buy it for and how low can we sell it? So we decided to take the exact opposite approach that politicians have been taking."

That approach involves selling generic drugs for a 15 percent markup, plus $3 for pharmacy labor and $5 shipping. The result is that Cuban's company is able to sell generic drugs at significantly lower rates than typical retail prices. For example, a 30-day supply of Amlodipine, a common high blood pressure medication, costs only $3.60 at Cost Plus Drugs, while the typical retail price is $50.10.

Some drugs have even higher savings. Becker's Hospital Review recently published a list of the 50 drugs with the biggest savings at Cuban's pharmacy. Albendazole (generic for Albenza) topped the list, saving consumers over $6,000 for a 30-count supply. In all, 14 of the top 50 discounted drugs save consumers over $500 for a 30-count supply when purchased from Cost Plus Drugs.

Cuban's company is restricted to unpatented generic drugs. While Cuban can sell these drugs at a massive discount, it is worth noting that research into new drugs, as well as the costs of clinical trials, is funded by the high profit margins derived from patents. While Cost Plus Drugs is a welcome innovation for drugs that are no longer patented, Cuban's business model likely can't fund drug innovation. 

Praise for the company exploded this month as customers took to Twitter to share the massive discounts Cost Plus Drugs offered on their medications. One user tweeted, "so one of my medications is $990/mo for 9 pills… with insurance… Mark Cuban's new company @costplusdrugs has it for $3.90/pill." Another person wrote, "My monthly generic meds would be less than half the price of what my insurance charges me," saying that Cuban's company "could be a game changer." Even Kim Kardashian shared her excitement for the company, writing that "everyone should be able to purchase the life saving medications they need at affordable prices!"

Why hasn't this model been done successfully before? "I don't believe it's too simplistic to say that the answer is 'greed,'" says Lucia Mueller, the vice president of operations and communications at PharmacyChecker, an organization that helps patients find affordable medication. "If your desire is to center profit instead of health outcomes, the pharmaceutical and healthcare industries have spent decades putting on a masterclass."

Cuban himself notes that Cost Plus Drugs isn't the first company to try this approach, but it is the first to succeed: "Entrepreneurs like myself will build up the companies, the equivalent of a costplusdrugs.com. And then…the five big pharmacy benefit managers or the big insurance companies, they'll buy them."

Last week, a new study from the Annals of Internal Medicine estimated that if Medicare Part D plans had purchased generic drugs from Cuban's company, Medicare could have saved $3.6 billion in 2020.

The study compared expenses on 89 generic drugs and found that 77 of the drugs were cheaper to purchase at Cost Plus Drugs. The authors wrote that their "findings suggest that Medicare is overpaying for many generic drugs." They add that "generic drug competition is a major source of prescription drug savings in the United States, but the lower prices from a direct-to-consumer model highlight inefficiencies in the existing generic pharmaceutical distribution and reimbursement system."

Cuban has been vocal on Twitter about the study, asking President Joe Biden and other political leaders to "have your people call my people and let's get this done." However, as exciting as reducing Medicare's budget sounds, progress on the issue seems unlikely. Legislative solutions to the high price of prescription drugs have often been slow-moving and stalled by partisan bickering. 

According to Cuban, political inefficiency was a major driver in the creation of Cost Plus Drugs. "It was obvious there was not going to be a political solution," he told PBS News Weekend. "And even the attempts that are being discussed don't really get to the heart of the problem, setting a price or doing a discount against other prices. All these numbers work from artificially set retail and wholesale prices."

With government action on affordable health care patchy at best—despite massive spending—Cuban has used a simple idea to provide life-saving, truly affordable drugs to millions. "That people have to choose between eating, you know, their rent, and taking their medications or buying their medications in United States of America and 2022. It's just wrong," he said. "I've been incredibly blessed in that my next dollar is not going to change my life. But my ability to invest in costplusdrugs.com is an ability to change millions of lives in this country, if not tens of millions over the next two years."