August 13, 2022

Mark Cuban’s online pharmacy is set to disrupt the prescription drug market, but there are some caveats [Update]

Two weeks ago, Mark Cuban Cost Plus Drug Company (MCCPDC) launched an online pharmacy. The launch comes just two months after the establishment of its Pharmacy Benefit Manager (PBM) operation.

The MCCPDC had been a registered pharmaceutical wholesaler for over a year, but initially stocked only a handful of drugs. He now buys more than 100 generic drugs directly from manufacturers, bypassing middlemen to drive prices down dramatically. It’s basically a 503(b) compounding pharmacy, focusing on drugs on the Food and Drug Administration’s shortage list.

On February 15, the company announced price cuts on four drugs.

There’s no doubt that Mark Cuban’s venture will have an impact, but will it be as disruptive to the prescription drug market as some in the media project? Not initially. The company’s impact on the drug market as a whole will be limited by the number and type (generic) of drugs offered, as well as the fact that it is a cash-only system.

The company’s origins date back to 2018 when Dr. Alex Oshmyansky founded Osh Affordable Pharmaceuticals. Mark Cuban financially supported Oshmyansky’s efforts, and more than a year ago the company was renamed.

The company’s mission statement describes how it is dedicated to producing low-cost versions of high-cost generic drugs. Here, the stated objective is to be “radically transparent” in its price negotiations with pharmaceutical companies.

Cuban society lets all stakeholders know what it costs to manufacture, distribute and market its medicines. According to the company’s website, there will be no hidden costs, no middlemen, and no discounts that are only available to health insurers or pharmacy benefit managers. “Everyone gets the same low price for every drug we make.”

The company says it will buy directly from third-party vendors or manufacture its own products and sell at a deep discount with a 15% markup, plus a $3 pharmacist fee.

Details are still scarce on where the company will initially source the drugs, but it expects to complete construction of a new manufacturing site by the end of 2022.

While the MCCPDC will have an impact, as currently constituted, it will not be as disruptive to the prescription drug market as some media outlets have predicted.

First, the MCCPDC only applies to generics. While there are certainly issues with specialty generic pricing, these pale in comparison to issues with brand name pricing, whether in the form of high introductory prices or annual list price increases. of some existing brand name drugs that exceed inflation.

Second, there are several limitations regarding the scope of the online pharmacy. Currently, the number of products offered – 100 – is relatively small. More importantly, Cuban society does not accept prescription insurance. Obviously, for the uninsured, this doesn’t matter, and having access to some low-cost generics from the Cuban company will be very helpful. Likewise, for policyholders with high deductibles or other coverage gaps in the insurance, the MCCPDC will help. But, beyond the deductible space, for most insured clients, the MCCPDC is less attractive. Additionally, insured consumers who use the Cuban Online Pharmacy will not have their out-of-pocket payments for their insurance deductible or other coverage gaps. This means that for prescription drugs not available in the Cuban online pharmacy – which represents the vast majority of drugs – the consumer will have to spend money out of pocket for products covered by the insurer before the insurance does not comes into force.

In this vein, the MCCPDC also fails to address the much larger issue of the traditional dominance of Pharmacy Benefit Managers (PBMs). Three PBMs – CVS Caremark, Express Scripts and Optum Rx – control over 80% of the market. The MCCPDC is in competition with the retail pharmacies which will remain under the control, if you will, of the large PBMs. If a retail pharmacy were to decline all of the insurance plans it runs and become cash-only, it would lose virtually all of its business.

Transparency is the buzzword in healthcare. It is easy to understand why. US healthcare markets generally lack transparency. And, without it, the market cannot function optimally. Billionaire Mark Cuban is to be commended for tackling the lack of transparency.

In addition, by providing better access to certain life-saving medicines that patients depend on, the MCCDPC provides a valuable service. In a statement, Alex Oshmyansky said “it is imperative that we take action and help expand access to these medicines for those who need them most.” Indeed, the MCCPDC currently offers drugs to treat various diseases, including diabetes, cancer, asthma, and cardiovascular disease.

But, the limited offerings and being a cash-only business mitigate the disruptive impact of Cuba’s innovative online pharmacy on the overall prescription drug market.


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