Billionaire Mark Cuban’s discount drug startup gains serious attention

cubanmark-150x150While some individuals with jaw-dropping wealth have pushed into showy extremes of shooting themselves and their pals into outer space or dropping hundreds of millions of dollars on yachts or Manhattan penthouses, a tech mogul and pro basketball franchise-owning billionaire is winning attention by attempting something different, challenging, and potentially beneficial to regular folks in great need: He is trying to make skyrocketing prescription drug prices affordable.

The Cost Plus Drug startup by entrepreneur Mark Cuban (shown above) could not only benefit individuals but also the federal government, providing Medicare an estimated $4 billion in 2020 savings on the cost of generic meds.

Those aren’t figures hyped by the imagination of the Texas billionaire’s publicists. They were published in the Annals of Internal Medicine, based on research by three MD-Ph. D.s in part of the medicine department at Brigham and Women’s Hospital. and Harvard Medical School. Dr. Hussain Saleem Lalani, the lead author of the study, told NBC News this of the research findings:

“The study ‘does show that Medicare is overpaying for some of the generic drugs [it covers for older Americans]. And this is a conservative estimate, so the actual savings are likely higher.’”

It is worth backing up a bit to see why the experts took the Cuban venture seriously. As Cuban has explained in interviews, his new drug business sounds almost scripted for “Shark Tank,” the popular television show that he’s a star on and that matches rich venture capitalists with ambitious entrepreneurs. Cuban, owner of the NBA’s Dallas Mavericks team, has said that he gets in the course of his day many random pitches and he reads and actually considers them, including one that especially intrigued him from Alex Oshmyansky.

Oshmyansky is a practicing Dallas radiologist, who holds a Ph. D. in mathematics and says he finished the first year of law school in Baltimore just to see what legal thinking was all about. The doctor says he, like many in his field, was repulsed by the avarice of Martin Shkreli, the hedge fund investor better known as the “pharma bro.” Shkreli was convicted of securities fraud, but not before he became the infamous poster boy of wealthy investors buying up drug makers and jacking up the prices of their desperately needed products to the dismay of patients, doctors, and hospitals.

Oshmyansky tried for several years to learn more about the pharmaceutical industry to slash through its size and complexity to see if patients could get better deals on their drugs, especially if someone could eliminate the many middle parties, each taking their own cut of increasing profits and sending prices soaring.

He failed in his initial efforts, charitable as they might be, with colleagues and experts advising him that his ideas would work only if they could be scaled up. Translation: To get started and keep going in Big Pharma, it takes money to make money. Which, eventually, led him to contacting Cuban and working with him for several years before they launched Cost Plus Drug. It now works this way, according to NBC News:

“Cost Plus Drug offers certain generic drugs, such as the depression drug fluoxetine or blood pressure medication lisinopril, at discounted prices, by selling medications at a fixed markup of 15% plus a $3 flat fee, according to the company’s website. Cost Plus doesn’t offer brand-name drugs or accept insurance, so patients pay for medications out of pocket.”

Cuban elaborated in an NPR interview on how the drug company works and differs:

“It’s just wrong that people have to choose between eating … their rent and taking their medications or buying their medications in United States of America and 2022. It’s just wrong. And it was obvious there was not going to be a political solution. 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. 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. And to me, you know, once we realized that we could do this I had to do [it]. And by the way, we’re past 100 drugs now. We just crossed added another 90 yesterday, so we’re past 700. And while those first 700 plus are generic will be added brand — adding branded name drugs as well over the course of the year, and by the end of this year, we hope to be passed 2,000 drugs.”

The company’s website describes its approach and provides details on the cash costs of prescription medications that the firm sells — price transparency that the expert researchers and others say would be valuable not only to individual patients and their doctors but also taxpayers.

Juliette Cubanski, deputy director of the program on Medicare policy at the Kaiser Family Foundation, told NBC News that the Boston experts’ findings illustrate how hard it can be for purchasers — even the giant federal government — to bargain for best prices on drugs with prices that seem to rise relentlessly:

“Right now, price negotiation is ‘just a completely black box. There’s not a lot of transparency. We’re kind of putting the burden on the patients to chase down lower prescription drug prices as opposed to kind of finding ways to make them widely accessible.”

To be sure, this online pharmacy is promising — even lifesaving for some patients, Helaine Olen, the author of “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry,” wrote in an Opinion piece in the Washington Post. As she noted:

“Cost Plus is selling imatinib, the generic version of blood cancer miracle drug Gleevec, for $17.10 a month. Its list price is just north of $2,500. Even the insured are finding paying Cost Plus directly can sometimes amount to significant savings.”

Alas, the company — even with Cuban’s deep pockets — will find increasing resistance to cost cutting from Big Pharma players, including wholesalers, middlemen like pharmaceutical benefits managers, huge chain drug stores, and drug makers themselves, especially manufacturers of wildly lucrative brand name meds, Olen argued. She added this:

“[N]o matter how successful Cuban’s business is, it can’t come close to addressing the overall problem that really needs solving: the question of why prices for prescription drugs are so high in the United States. Americans pay more — significantly more — for prescription medications than people do in other countries. That’s true for branded drugs under patent, and that’s true for prescriptions that have generic equivalents. The U.S. government, unlike every other developed country, does not negotiate with the pharmaceutical industry to determine the price we pay for their offerings. That’s a major reason that the United States is a cash cow for drug companies. This system has been impervious to almost every effort to restrict it. Legislation to permit Medicare to negotiate drug prices falls by the wayside time and time again, despite the idea’s enormous popularity. That’s almost certainly due to the influence of Big Pharma money in Congress. No matter what reform gets discussed, sooner or later, someone steps forward to oppose it.

“The result: According to a December poll from the Kaiser Family Foundation, a quarter of all Americans say they have experienced trouble paying for prescribed medications, with 16% saying they have not filled a prescription because they couldn’t afford the bill. Medicare helps but is far from a full solution: A study conducted by the Department of Health and Human Services found that, in 2019, 3.5 million Medicare recipients over the age of 65 reported they had difficulty affording their prescription drug bills.”

Unacceptable. In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the exploding cost, complexity, and uncertainty of treatments and prescription meds, too many of which turn out to be bankrupting and dangerous drugs.

This post is absolutely not an endorsement of Cuban or his drug enterprise. He and his partner deserve credit, though, for tackling what has become an intractable issue and providing what appears to be at least one way to deal with the relentless rise in prescription drugs. Doctors and hospitals have initiatives of their own, as do states like California.

We all have much work to do to ensure that beneficial medications are safe, accessible, affordable, effective, and excellent. We cannot be held as financial hostages forever by Big Pharma.

Patrick Malone & Associates, P.C. listed in Best Lawyers Rated by Super Lawyers Patrick A. Malone
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