Mark Cuban is making medication costs an easier pill to swallow

Imagine walking up to the pharmacy counter to pick up a new prescription from your doctor. You hold your breath as the pharmacist rings up the total, only to feel a sinking in your chest when you hear them say that your one-month supply of a life-saving medication is $800.

For many people, this isn’t just a hypothetical situation, it’s a reality. I used to pay that price for a single medication, and many others face even higher costs. For countless Americans, the steep price of prescription medications can make essential medications feel like unaffordable luxuries.

The U.S. has the highest prescription drug costs in the world. A 2021 study found that drug prices in the U.S. were 2.5 times higher compared to 32 other countries. This is largely due to the lack of regulation and transparency in drug pricing.

In most countries, the government regulates the prices at which prescription medications can be sold. However, in the U.S., drug pricing is largely unregulated, with notable exceptions for the prices negotiated by Medicare, Medicaid and certain federal agencies. In addition to the overall lack of federal regulation, there is a lack of transparency and a complex process by which medications are priced. This results in medication prices varying widely depending on a patient’s insurance and even the pharmacy they choose.

But someone is looking to disrupt this system.

Mark Cuban is on a mission to provide patients access to safe and affordable medications. In 2022, he and Alexander Oshmyansky founded Mark Cuban Cost Plus Drugs Company. This online pharmacy offers prescription medications at a fraction of the cost of traditional pharmacies.

The pricing puzzle: Manufacturers, middlemen and more
In a typical supply chain, manufacturers set a list price for a product. The product is transported to a retailer, which then sets the price for the customer. The customer pays the retailer, who then pays the manufacturer.

The pharmaceutical industry follows a similar process – to a point. Drug manufacturers set a list price for a medication, which is then transported and distributed by wholesalers to pharmacies. Customers pay their copay to the pharmacy and the pharmacy bills the customer's insurance company for the remaining cost of the medication.

This is where it gets complicated. 

"For countless Americans, the steep price of prescription medications can make essential medications feel like unaffordable luxuries."

-- Rachel Stubler

Pharmacy benefit managers (PBMs) act as intermediaries between the drug manufacturers and the insurance companies. PBMs negotiate rebates from the drug manufacturers, which lower the cost that insurance companies must pay for medications. In return, the medication is moved up on the formulary list – a catalog of prescription medications covered by a specific insurance plan. Formulary lists are typically organized into tiers and moving a medication up reduces the copay patients are responsible for, driving higher sales. The higher the rebate paid by the drug company, the higher up on the formulary the medication is moved and the more likely patients will fill their prescriptions for the medication.

These rebates are shrouded in secrecy. The exact amounts of these rebates and the cuts taken by the PBMs are not publicly disclosed. However, drug manufacturers often cite this system as the reason that they continuously raise drug prices.

This system is particularly harmful to uninsured individuals and those on high-deductible insurance plans. These patients may be responsible for paying the full list price of the medication. And in some cases, this is prohibitively expensive, preventing them from taking potentially life-saving medications.

Slashing costs with a direct approach
Unlike Good Rx, which negotiates with PBMs to offer coupons that lower the price consumers pay for prescription medications, Cost Plus Drugs lowers medication costs by cutting out PBMs entirely. Cost Plus Drugs negotiates directly with drug manufacturers to purchase generic medications at low list prices. The medication cost is then marked up by 15% to cover business operations with an additional $5 fee for pharmacy labor and a $5 shipping fee.

The result is that patients can receive the same quality medications at a much lower cost.

One caveat to Cost Plus Drugs is that it currently only accepts a limited number of health insurance plans. Most patients will be responsible for paying the full Cost Plus Drugs price for their medication, and this expense will not count towards any insurance deductibles or out-of-pocket maximums.

However, the savings can be so substantial that patients still save money overall. For example, the list price for a one-month supply of imatinib, a chemotherapeutic used to treat leukemia and other types of cancer, is around $2500 at other pharmacies. At Cost Plus Drugs, it costs only $13.40. In the future, they hope to expand insurance partnerships.

Cost Plus Drugs is rapidly expanding. When the company launched in January 2022, it offered 100 medications. By the end of 2023, its inventory had expanded to include over 2,200 medications.

In addition to lowering the prices of medications, Cost Plus Drugs is also joining the manufacturing game. In March 2024, they opened a 22,000-square-foot manufacturing plant in Dallas, Texas. The facility is producing epinephrine, the medication used to treat severe allergic reactions, norepinephrine, the medication used to treat severe low blood pressure and certain types of heart failure and shock, and the injectors that deliver them. Both of these medications have had shortages in the past decade.

While Cost Plus Drugs currently only offers generic medications, they hope to expand to include brand name drugs in the future. With no marketing budget, Cost Plus Drugs relies entirely on word-of-mouth and media coverage to reach new customers.

While I no longer take the medication that once cost me $800 a month, it’s encouraging to see the new approaches that Cost Plus Drugs is taking to challenge the traditional drug pricing system. By cutting through layers of complexity and eliminating middlemen, such initiatives offer a glimpse of a more affordable future.

Yet, the broader issue of high medication costs persists, highlighting the urgent need for systemic reform. As we continue to explore innovative approaches to lowering drug prices, it’s crucial that we advocate for increased transparency and regulation within the pharmaceutical industry. By pushing for meaningful reforms and staying engaged in the conversation about drug pricing, we can work towards a future where essential medications are accessible and affordable for all.