Healthcare is ushering in a new age of consumerism, with price transparency at its core. From primary care to mental health services, companies like Sesame Health, Ro, and Thirty Madison are advertising out-of-pocket costs—turning patients into customers. But while patients can now compare acne and hair loss solution prices, they are still suffering from skyrocketing drug costs for life-saving treatments.
The pharmaceutical industry is particularly resistant to consumerism. Drug pricing depends on a whole slew of players including pharmacy benefits managers, wholesalers, manufacturers, and insurers.
Manufacturers set a list price. Wholesalers buy drugs at a discounted rate. Wholesalers sell prescription drugs to pharmacies. Payers then reimburse pharmacies for administering drugs with reimbursement rates depending on negotiations with insurers.
What’s more, the final price of a drug is seldom disclosed outside of health plans.
To make matters more confusing, prices faced by consumers are set by individual pharmacies. A single drug can be sold at a $52 difference within the same ZIP code.
So by the time a customer picks up a prescription at the pharmacy, it’s easier to just cough up the money rather than try and understand why drug prices can be so expensive and variable. It’s this complexity that shields pharmaceutical companies from consumerism and demands for price transparency.
Far from an overstatement, there are systemic issues within the pharmaceutical industry. 1 in 10 Americans skip doses to save money and 18 million Americans cannot afford a single prescription medication for their household.
Historically, the government has opted not to regulate drug prices—instead prioritizing natural forces of supply and demand. The issue: healthcare doesn’t operate under free market conditions.
Much of the legislation surrounding pharmaceuticals actually reinforces high drug prices. In 2010, the Affordable Care Act established the Biologics Price Competition and Innovation Act, giving an exclusivity patent to biologics manufacturers. This legislation put a monopoly on novel treatments for 12 years, preventing “off-brand” versions from entering the market. The top three PBMs—Caremark, Express Scripts, and OptumRX—also manage 80% of specialty prescription claims.
In the private sector, tech giants Amazon, Microsoft, and Apple have all —very publicly— tried to infiltrate healthcare. One tech billionaire, however, has quietly made it his mission to disrupt the pharmaceutical industry by making drugs more affordable.
In January 2022, famed investor and Shark Tank personality Mark Cuban and Co-Founder Dr. Alex Oshmyanksy launched Mark Cuban Cost Plus Drug Company. Touting complete price transparency, Cost Plus Drug (CPD) buys directly from manufacturers, bypassing PBMs and insurers. CPD sells drugs at a lower cost through a direct-to-consumer model. Prices are explicitly stated on the company website and calculated based on a 15% markup of purchase cost plus shipping and labor fees.
“Many people are spending crazy amounts of money each month just to stay healthy. No American should have to suffer or worse - because they can’t afford basic prescription medications.”
~ Mark Cuban
Cuban had no previous intention to enter healthcare. But after receiving a cold email from his Co-Founder expressing frustrations over a 5455% markup of a life-saving antiparasitic drug, he became compelled to invest. So much so that he decided to put his name on the company.
Cost Plus Drug now offers more than 1,000 medicines through its online pharmacy. 92% of Americans have health insurance, leaving over 30 million without the means to afford medicine through the traditional pharmaceutical industry. What’s more, patients with high deductible insurance plans are paying out-of-pocket as if they aren’t covered. CPD is directly combatting high costs by making price transparency its number one priority.
Originally named Osh Affordable Pharmaceuticals, Cost Plus Drug is not an end-all solution. There are tens of thousands of medications on the market not sold through CPD’s online pharmacy, and the company only recently added a 10th “brand-name” drug to its selection. And while price transparency helps ease the financial burden felt by low and middle-income communities, homeless populations cannot use the online service because they don’t have a mailing address.
With fewer than 100 employees, Cost Plus Drug has a ways to go before transforming the pharmaceutical industry. But after just two years since launch, CPD is moving in the right direction.
Cost Plus Drug announced a new partnership with Expion Health, incorporating CPD’s pricing capabilities into Expion’s cost management solutions.
Taking manufacturing into its own hands, CPD is building a 22,000-square-foot fill-and-finish facility in Dallas, Texas.
The company is working to begin offering EpiPens and insulin.
CPD will also begin the production of orphan drugs, which are used to treat diseases affecting less than 200k patient populations. Specialty drugs are responsible for 51% of all drug spending despite treating just 2% of the population.
Mark Cuban has made it clear he is prioritizing patients over profits by distinguishing Cost Plus Drug Company as a public-benefit corporation. While it isn’t the first company trying to offer drugs at lower costs, it is the first to be spearheaded by a billionaire, who wants Cost Plus Drug to be his legacy. Companies like Cost Plus Drug are usually acquired by PBMs for a healthy sum.
Lucky for us, Cuban just sold his majority stake in the Dallas Mavericks for $3.5b, so he doesn’t exactly need the money.
This week in healthcare:
NYC Health + Hospitals expands lifestyle medicine program to Brooklyn, Healthcare Brew
What 4 Execs Want People To Know About the Intersection Between the Justice System and Behavioral Health, MedCity News
The US doesn’t have universal health care — but these states (almost) do, Vox
Food-as-Medicine Platform Startup Season Acquires Clinical Assets from Wellory, FemTech Insider
Can a Big Pharma Ever Be Worth $1 Trillion?, WSJ
It is a big step. I hope more people use it.