Could a Mark Cuban startup be a pharmaceutical disruptor?

One of the most difficult enigmas of modern American life is the high cost of medical care and prescription drugs, especially compared to other wealthy countries. Although very little about the need for health care and medicine meets the definition of a market transaction between a willing buyer and seller, many in this country have a powerful fetish for preferring markets to government price caps. .

Including health insurance companies in the mix further amplifies price distortions and blurs the picture. Amid thousands of dollars a month in life-saving prescription drugs and life-saving five-figure procedures, insurance deductibles, negotiations and copayments obscure the true cost to consumers and the true revenue to consumers. suppliers.

This is my best explanation of why we have the weirdest health care pricing mechanisms imaginable. Price obfuscation and results couldn’t be worse if deliberately engineered that way by demons.

In any reasonable, non-market fetish society, the government would cap the prices of certain prescription drugs, and Big Pharma and the insurance companies would have to deal with that. But in our country, state governments and the federal government reject such proper intervention.

“We are not socialists. We are not Venezuelans or Cubans,” say the fetishists.

Ah, but there is another way to be Cuban. I’m particularly interested in the giant experiment launched in January by Mark Cuban.

Cuban owns the Dallas Mavericks and is a star investor on the entrepreneurship TV show “Shark Tank.” His initial fortune came from building and selling technology companies, particularly Broadcast.com, which he sold to Yahoo.com in 1999, bringing in around $1 billion for himself. Yahoo’s acquisition of Broadcast.com was considered one of the worst internet deals ever after the service shut down in 2002. Cuba has good timing.

In a more recent well-timed show, he launched the Mark Cuban Cost Plus Drug Co. in January 2022, offering 100 generic prescription drugs for sale online. The idea is that a potential user searches for a brand name drug online and finds the equivalent of the generic drug on the Cost Plus site. It could be 25% cheaper than the brand name provided by his doctor, even 95% cheaper in some cases.

Cost Plus has radical transparency and consistency around its prices, which it displays on the site. The customer price is always set by the following formula: acquisition cost from the manufacturer, plus 15%, plus $3 for a pharmacy cost, plus approximately $5 for shipping. The difference in clarity between this and the weird way most people currently buy prescription drugs is amazing. The price savings in many cases are also potentially wild.

Since Cost Plus does not take out insurance, users must compare the overall cost of their current medications – taking into account their deductibles – to an out-of-pocket cost for this service.

My friend Venessa is the only one on my social networks who replied that she uses Cost Plus, which partly tells me that the Cuban experience is in its infancy.

Venessa quit her job in January, and she and her self-employed husband decided to self-insure, meaning they pay for health care out of pocket.

After giving birth to her second child, Venessa got a prescription for Zoloft to manage anxiety. Zoloft is also a suitable substance to take while breastfeeding.

The monthly cost of Zoloft is $150 to $400, depending on dosage and insurance. Because she pays out of pocket, Venessa switched to the generic equivalent, called Sertraline, and she buys it at Cost Plus for $8.90 a month. She was thrilled to tell me about Cost Plus and said she had told her friends to try it too.

Starting the program, she said, involved a back-and-forth process with her prescriber, who didn’t have the information for Cost Plus in her system, as CVS’s pharmacies likely would. Walgreens or HEB, for example.

We discussed a few limitations. Because it takes about four days to arrive, Venessa said that for urgent medication — like antibiotics for an infection in her child — she would go to the pharmacy to get medicine the same day. Additionally, healthcare providers and family members cannot purchase prescription drugs through the online system. Only the patient can create an account and order.

I don’t know — and the company didn’t answer my question — how many customers Cost Plus has acquired since January. It was launched with a list of 100 generics. Since then, it has expanded to 200 generics, covering 58 medical conditions.

For current conditions, it offers a substantial menu. In addition to Sertraline, the site offers 42 other generic brand-name mental health medications, including names I recognized like Effexor, Wellbutrin, Prozac, and Abilify.

For another common condition, high blood pressure, it offers 43 generics. It lists six generics for birth control and nine for high cholesterol. You had the idea. There are an incredible number of prescription drugs and generics out there, and Cost Plus certainly won’t have it all, but it seems likely it would have a lot of what people commonly need.

It’s clearly a slam dunk for people like Venessa paying out of pocket. It’s less certain that it will save money for people with platinum-level healthcare plans. It depends on an individual’s plan and prescription deductibles.

The current system of prices and market signals for prescription drugs is definitely weird. People with health insurance generally become indifferent to drug costs above their deductibles. As long as the insurance company pays, in a sense, who cares? Except that as a system, it matters.

With his company, Cuban is betting that a market-based entrepreneurial disruptor is the right way to fight the high and opaque medical costs we all face. I hope it works. I hope we’ll all be buying Cuban-style drugs soon. This would bring some clarity and price pressure needed for our current system, with an entrepreneurial market mechanism.

Michael Taylor is a columnist for the San Antonio Express-News, author of “The Financial Rules for New College Graduates” and host of the “No Hill For A Climber” podcast.

michael@michaelthesmartmoney.com | twitter.com/michael_taylor

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