Mark Cuban got into the drug business. But what?

When billionaire Mark Cuban announced his attack on the pharmaceutical industry and its high-priced drugs in January 2021, it was met with applause.

His new company, Mark Cuban Cost Plus Drug Co., known as Cost Plus Drugs, offers “the lowest drug prices in the world,” he said.

The serial entrepreneur and owner of the NBA Dallas Mavericks preached to the media, garnering press attention through The Wall Street Journal, Time, The Daily Show, and more. He provided colorful quotes along the way, at one point stating that his goal is to “just screw up the pharmaceutical industry so badly that they bleed.”

His new company, which is currently offers over a thousand generic drugsSocial Media Influencers Praise Him: Reality TV Star Kim Kardashian both tweeted and praise on Instagram. Former basketball player and Twitter personality Rex Chapman. said the Cuban “Changing the Prescription Drug Price Game in America”.

Even the swingers forum on Reddit finds a lot of positive feedback about the company’s low prices for Viagra and other drugs.

Behind the hype, however, is a grim reality: in many cases, the prices patients see on the website are higher than at their local pharmacy. This is due to the segment that Cuban plays in – generic drugs – as well as the layers of complexity that characterize the American healthcare system.

Now his company mainly sells generics, drugs that are no longer protected by patents that could provide monopoly profits to large pharmaceutical companies. In most cases, this is the cheapest part of the pharmaceutical economy.

To explore a significant portion of Cuban’s merchandise, KHN went through all of the medicines and products offered on its website that begin with the letter “A”, with every combination of strength, quantity, or amount and type of medicine (such as capsule, tablets, or gummies). This is a solid sample: at the beginning of February it amounted to 211 combinations.

KHN compared the prices of each type of medicine with the prices of the same medicines at other pharmacies, whose data was collected by the discount site GoodRx. Focusing on the Washington, DC area where KHN is based, the publication found lower prices at at least one pharmacy on GoodRx that does not include Cuban’s company in its comparisons, in 141 cases.

In the remaining 70 cases, Cuban had lower prices or was only beaten by one-off offers. Where there were savings, they could be significant. A Washington resident taking aprepitant, an anti-nausea drug, can save hundreds of dollars by using Cuban’s website.

The analysis was not comprehensive, as Cuban pointed out in an email to KHN. This is partly due to the company’s pricing model: a 15 percent markup over manufacturers’ costs, plus $3 labor per drug and $5 shipping per order.

Many generics are so cheap that the $5 shipping cost will absorb any small savings. However, Cuban noted that bundling multiple drugs — all with the same $5 shipping cost — could end up being cheaper.

In other regions of the country, prices may be less favorable. When presented with the KHN analysis, the Cuban thought that the cost comparison might be better elsewhere. “Perhaps they were offering a special happy hour in D.C. :),” he wrote, attaching screenshots comparing prices on his website for 10 and 40 milligram doses of atorvastatin, a popular cholesterol drug, with CVS prices in Dallas. (But a search in Dallas didn’t turn up the best results: there was at least one online or offline option for every dosage and quantity with lower prices than Cuban’s.)

So why aren’t prices on Cuban necessarily lower than elsewhere? This is due to the nature of the healthcare industry. While his Twitter bio says he is “dipping into the pharmaceutical industry,” what Cuban has in mind doesn’t line up with what most people think.

“I don’t look at our competition so much as the generic drug makers themselves,” Cost Plus Drugs co-founder Dr. Alex Oshmiansky said in a March 2021 pharmacy podcast.

Indeed, Oshmyansky said, they compete with drugstore managers and wholesalers.

Thus, Kubin is not yet betting that drug manufacturers are inflating prices, but that intermediate companies – PBM, wholesalers and pharmacies – are doing it.

And that bet is unlikely to pay off for Cuban. And here’s why: PBMs negotiate the cost of a basket of medicines for their clients—insurers and employers. They are trying to reach the total drug costs for each member of each plan. Optimizing the cost of each drug for each patient is not necessarily their goal.

Thus, PBMs accept discounts from drug companies and use other strategies that cut costs (in theory) without necessarily lowering the price of individual drugs. Pharmacies, in turn, enter into contracts with several PBMs.

The price offered by PBM may change – sometimes from day to day. This is why organizations such as GoodRx (which aggregates prices across multiple outlets) and some independent pharmacies (which may purchase drugs from wholesalers looking for high volumes) can offer the best prices on individual generics. For the same reason, it is difficult to significantly reduce overall drug costs.

Other large companies are trying other cost-cutting strategies. Amazon, for example, has launched a subscription for members of its Prime Club, which provides unlimited access to 53 generics. There are significant overlaps between the Amazon and Cuban listings. If Cuban’s influence worries about Amazon, he doesn’t say so. “I won’t officially talk about competitors,” he told KHN.

It’s common for large retailers like Walmart to offer low fixed prices on many generics. There are also startups like Renee that offer generic subscriptions.

Cuban’s company occupies an unusual niche in the market. It’s not a pharmacy – it relies on mail-order company Truepill for those services. It’s also not a PBM, although he does collaborate with some of them.

Cost Plus Drugs has begun the process of building its own generics plant, but right now critics are wondering if this is really changing the supply chain. “They are not fulfilling their mission of eliminating middlemen because they don’t manufacture anything yet and don’t have their own pharmacy, i.e. they are just middlemen,” concluded Kyle McCormick, owner of an independent pharmacy that also offers cash prices based on a similar markup. on the cost of medicines.

“It upsets me that they claim to be innovators when all they are doing right now is making things a little better than the actors,” he said.

According to GoodRx CEO Doug Hirsch, Cuban often demonizes his competitors. “He’s a TV presenter and he does a great job of holding back consumer anger,” he said, before admitting he’s glad Cuban is on the market.

Indeed, media blitz is the most important component of the company’s success. Cuban said his company doesn’t spend money on marketing. Some credit the size of his Twitter followers (nearly 9 million accounts) or his ability to get news coverage. Cuban loans by word of mouth.

While patient comments on social media are generally positive, there are exceptions—and telling ones. Elizabeth Bitros, a Gen X nurse assistant from New Jersey, said she switched antidepressants to Cost Plus medications after her regular pharmacy tried to charge her hundreds of dollars. But Cuban’s company wasn’t perfect either, she said. The glitch caused her antidepressant replenishment to be delayed around the 2022 holiday season.

“It’s a drug, you start to stop taking it if you miss a dose,” she said. “I don’t want to shoot on holidays!” But getting customer service from Cost Plus Drugs wasn’t easy: it was hard to get someone on the phone. “It was all done electronically,” she said. After several days of working with her doctor, she returned to CVS.

Cuban declined to comment on the Bitros case specifically in the entry, but wrote, “We try to be very transparent about the fact that while we have operators available and we’re always looking for exceptions that require personal attention and improving our support, we won’t the fastest or strongest touch source.”

Cuban concluded, “It’s just the reality of being a low-cost supplier.”