Mark Cuban enters online prescription market ‘nibbling at the edge of transparency’

Lena Weib

April 29, 2022

9 min read


Source:
Healio Interviews


Disclosures:
Feldman reports advisory board roles for Eli Lilly and Merck. Gewanter, Levin and Schweitz report no relevant financial disclosures.


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With the launch of his direct-to-consumer online pharmacy, billionaire entrepreneur Mark Cuban aims to provide prescription drugs at lower prices than other online retailers and those mediated by pharmacy benefit managers.

Launched in January with Alexander Oshmyansky, MD, PhD, an emergency radiologist based in Dallas, as its CEO, the Mark Cuban Cost Plus Drug Company operates on a simple model: Drugs are available at wholesale cost plus a 15% markup, a $3 pharmacy labor charge and $5 for shipping. The service claims to accomplish this by cutting out “pharmacy middlemen” and negotiating directly with manufacturers.


Money and Stethoscope

“[Cuban] is nibbling at the edge of transparency, which is something we do not currently have,” Michael C. Schweitz, MD, told Healio. Source: Adobe Stock.

This information is prominently displayed on the company’s website, along with full retail prices for several high-profile medications. Currently, only generic medications for a modest range of conditions are available, but plans are in place to broaden the formulary, according to the site.

For the rheumatology patient, colchicine, methotrexate and tacrolimus are on offer, along with a cross-section of steroids, anti-inflammatories and musculoskeletal drugs.

However, there are no biologics available at this time. Many of these products remain patent-protected and extremely costly, and it remains uncertain whether Cuban intends — or has the ability — to enter this market.

The big question, of course, is what kind of overall impact, if any, Cuban’s new service could have on the problematic U.S. prescription drug market, beset as it is with high prices and a lack of transparency.

Madelaine A. Feldman, MD, FACR, president of the Coalition of State Rheumatology Organizations, founder and past president of the Rheumatology Alliance of Louisiana, and former chairwoman of the Alliance for Safe Biologic Medicines, is doubtful.

Madelaine A. Feldman

Michael C. Schweitz

“The reality is that the big three pharmacy benefit managers (PBMs) — CVS Caremark, Express Scripts and OptumRx — have a stranglehold on more than 80% of the American market,” Feldman told Healio. “I do not think Cuban is able to compete with them on a broad base at this point, but his business model is a disruptive one that proves you don’t need a bloated, opaque middleman to get medications into the hands of the patients that need them.”

Meanwhile, Michael C. Schweitz, MD, president of the Alliance for Transparent and Affordable Prescriptions (ATAP) Action Network, sees hope in Cuban’s move, comparing it favorably with the current opacity of U.S. pharmaceutical pricing structures and their resultant inflated costs.

“He is nibbling at the edge of transparency, which is something we do not currently have,” Schweitz said. “That is the whole key of how this may have a long-lasting impact on drug world: By forcing other parts of the supply chain to behave themselves.”

‘No rebates or other hidden fees’

Although it may be fair at first glance to compare Cuban’s service to a PBM, it is in fact different in several important ways, according to Feldman

“There are no rebates or other hidden fees,” she said. “This, at the very least, makes him different from a PBM.”

Another comparison could be made to GoodRx, which tracks U.S. prescription drug prices and provides patients with coupons for discounts on medications. However, that would also be inaccurate, according to Harry L. Gewanter, MD, medical director of Medical Home Plus and clinical associate professor of pediatrics at Children’s Hospital of Richmond at Virginia Commonwealth University.

“GoodRx is essentially sponsored by pharmacies and PBMs to have their lower prices,” he said. “Clearly, what Cuban is doing is unique.”

Gewanter described Cuban’s efforts in the prescription drug market as “refreshing” and “a good model.”

“I do not think it is possible understate the importance that, with this company, you know what you are paying for your product,” he added. “It should be self-evident that the price of a drug is the price, period, but this is simply not the case in any other situation in health care.”

That said, providing price transparency and actually competing on the level of major PBMs are two very different things.

Cuban has suggested in media interviews that the service may offer as many as 2,000 drugs by the end of the year. However, it is difficult to say whether that number will be sufficient to make significant inroads into PBMs’ turf, or even how many drugs it will take to reach that goal, according to Gewanter.

“I do not see how this is going to bring real competition among the PBMs,” he said. “And it is hard to tell how many drugs he will ultimately be able to acquire and sell.”

In addition, although the prices are generally lower than those found on GoodRx, that is not always the case. Cuban has not stated whether he hopes to undercut every other online pharmacy.

Despite these questions and uncertainties, Gewanter, like his colleagues, remains cautiously optimistic.

“Regardless of whether he will change the system, as long as he stays in business, this should help a significant number of patients gain access to medications at more affordable prices,” he said.

How many patients with rheumatic and autoimmune diseases will be able to count themselves in that “significant number,” however, is yet another factor that is yet to be determined.

‘We need a sledgehammer’

Much has been stated about the convoluted rebate systems and spread-pricing tactics of PBMs. Robert W. Levin, MD, past president of the Florida Society of Rheumatology, president of ATAP, and associate affiliate professor of medicine at the University of South Florida, stressed that organizations like ATAP have worked hard to bring these issues to light. According to Levin, some of the most egregious spread-pricing offenses occur with the most expensive drugs, which include biologics and other niche medications commonly used in rheumatology.

Harry L. Gewanter

Robert W. Levin

“We have these expensive drugs, and the PBMs play games with them,” Levin said. “We are trying to figure out how Cuban’s company can help.”

Currently, Cuban’s Cost Plus is not a place to go for people who need these specialty drugs.

“The problem with what he is doing is that it only chips away at the problem in rheumatology,” Schweitz said. “We need a sledgehammer.”

Meanwhile, the immediate impact of Cuban’s company in the rheumatology space would be on the prices of small molecule generic medications, such as methotrexate, leflunomide, sulfasalazine, hydroxychloroquine, steroids and NSAIDs. This could potentially lower costs for patients.

“The main holdup there is that he will have to wait until the patents run out on some of the small molecule drugs before he can even begin to think about making them,” Levin said. “Small molecules are the simplest to manufacture. Conversely, originator and biosimilar biologics are highly complex and would be very difficult to make.”

“The main holdup there is that he will have to wait until the patents run out on some of the small molecule drugs before he can even begin to think about making them,” Levin said. “Manufacturing these products is much more complex than manufacturing small molecule drugs.”

To that point, the patents on the small molecule janus kinase (JAK) inhibitors tofacitinib (Xeljanz, Pfizer), baricitinib (Olumiant, Eli Lilly & Co.) and upadacitinib (Rinvoq, Abbvie), and the phosphodiesterase inhibitor apremilast (Otezla, Amgen), are likely to be first on this list of advanced therapies that could feasibly be manufactured by Cuban.

“Generic versions of those drugs could potentially be made using a much simpler manufacturing process,” Levin said.

If Cuban gets a manufacturing operation up and running, his intentions and capabilities will be clearer. Until then, he is left with more business-oriented ways of entering the market. Speculation abounds about what he will do, how he will do it and what impact his efforts will have.

A ‘New paradigm’?

One potential result of the emergence of Cuban’s Cost Plus in the marketplace, aside from lower drug costs, is an elevated awareness about PBMs. As news of the service spreads, the shockwave set in motion by the company could reach beyond the bubble of the health care system, according to Schweitz.

“We at ATAP have been trying to educate employers who have had the wool pulled over their eyes by PBMs,” Schweitz said. “Now, we are going to employers to let them know of this development, if they have not heard about it already.”

Levin added that employers themselves are often unaware of why their health care costs are so high.

“Employers who are providing health insurance for their employees are largely in the dark about why things are so expensive,” Levin said. “Mark Cuban has connections across the business world who might be willing to listen to him.”

If Cuban does indeed deal with decision-makers and executives around the country, Gewanter suggested he should be telling them one thing: “You can use our model to lower your health care costs,” he said.

The result of employers gaining this information about their coverage policies could lead to an indirect effect on PBMs, according to Levin.

“If Cuban can convince enough big employers to understand why they are paying so much for insurance coverage for their employees, and that there is a way to get more reasonably priced drugs, they could impact the rebate system as it stands,” he said.

Beyond employers and PBMs, there is another group that could feel the weight of Cost Plus. “There could also be an impact on insurance companies,” Schweitz said. “People pay all this money in premiums, but if their main reason to have health insurance coverage is buying medicine, it might make some people say, ‘Why bother?’”

In short, the cost of medications from a company like Cost Plus could ultimately be cheaper than monthly premiums. Although Schweitz acknowledged that insurance coverage is also necessary for doctor visits or more costly screening and surgical procedures, he suggested that, at the very least, the availability of cheap prescription drugs is likely to force carriers to pay attention, if not reconsider how their formularies operate.

That said, it is important to keep in mind that none of this will be easy, according to Levin, who added that employers, insurers, pharmaceutical companies and PBMs are entrenched in a system that largely benefits themselves. Finding the weak spots and exploiting them effectively will be time-consuming and costly, he said.

“There are a lot of moving parts in the U.S. health care system, and there is a lot of money at stake,” Levin said. “A lot of things would need to change in order for employers to abandon the system as it stands and find a new paradigm of insurance coverage for their employees, or for PBMs to restructure their rebate system.”

This statement begs the question of whether Cuban even aims to upend the status quo the first place. It may be worth considering his stated or possible intentions to foresee how the situation will play out.

‘Crazy amounts of money’

“We started Mark Cuban Cost Plus Drug Company because every American should have access to safe, affordable medicines,” Cuban writes in the mission statement on the company’s website. “If you don’t have insurance or have a high deductible plan, you know that even the most basic medications can cost a fortune. 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.”

Although some may react to a billionaire celebrity entrepreneur entering the health care marketplace with suspicion, experts who spoke to Healio for this story stated they are willing to take Cuban’s altruistic mission statement at face value — until further notice.

“If you are a cynic, you say, ‘Here is a rich guy who wants to be more famous,’” Schweitz said.

He added that there is a growing consensus that Cuban is hoping to turn a profit in a “rational way.”

“There is plenty of money to be made in the drug supply market without gaming the system,” Schweitz said.

If there is reason for optimism, though, it lies with the medical background of Oshmyansky, the company’s co-founder and CEO, according to Gewanter.

“The radiologist Cuban is working with knows the business,” Gewanter said. “Between the two of them, it is not difficult to imagine that they will figure out where the gaps are and how to exploit them. We can only hope that when they do, our patients will be the beneficiaries.”

For Feldman, the most significant immediate impact Cost Plus will have on the market is in the realm of generic drugs.

“Cuban’s biggest issue now is getting the manufacturers to sell to him,” she said.

According to Feldman, Cuban has largely avoided backlash on this point because he is, compared to the major players that make up the U.S. prescription drug marketplace, “small potatoes.”

“Once he builds his own manufacturing plant, that may all change,” she said. “Considering his money and his high profile, that is not hard to imagine.”

The fact that Cuban has invested a significant amount of money — not to mention his reputation — toward these goals, is important, according to Gewanter.

“Number one, he will obviously be invested in making this a success,” he said. “The other thing is that it forces people to pay attention. Anything that forces people to think about different models in health care is a good thing.”

References:

Mark Cuban Cost Plus Drug Company: www.costplusdrugs.com. Accessed April 28, 2022.

For more information:

Madelaine A. Feldman, MD, can be reached at 2633 Napoleon Ave. Suite 530, New Orleans, LA 70115; email: [email protected]

Robert W. Levin, MD, can be reached at 1831 North Belcher Road, Clearwater, FL 33765; email: [email protected]

Harry C. Gewanter, MD, can be reached at 1504 Santa Rosa Road, Suite 210, Richmond, VA 23229; email: [email protected]

Michael C. Schweitz, MD, can be reached at 1411 N Flagler Dr. #5600, West Palm Beach, FL 33401; email: [email protected]

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