Isabela Ramirez & Armaan Salahuddin
Mark Cuban, an investor, American billionaire, shark tank icon, and owner of NBA Mavericks (amongst other things), is now on a mission to “f*ck up the pharmacy industry.” His words exactly highlight the goal of his new pharmaceutical company - Cost Plus Drugs. Launched in January 2022, just over a year ago, Cuban’s online pharmacy is intended to provide generic drugs at an affordable price as a registered wholesaler. In omitting the middleman present in all big pharma companies and selling over 100 drugs in a 15% margin, Cost Plus Drugs aims to disrupt the now customary trend of inaccessible medication. (Cost Plus)
How it works:
The Cost Plus Drugs Company is the brainchild of cofounder Alexander Oshmyansky, who cold-emailed Cuban in an attempt to secure a hefty investment towards his dream of affordable drug manufacturing. Oshmyansky sought to challenge companies that purchase contracts to construct generic versions of brand-name drugs. Drug manufacturers use “pharmacy benefit managers” to purchase said contracts. Here’s where the problems start to surface. Pharmacy benefit managers are responsible for negotiating the prices of these generic drugs to “health insurers, employers, and others that contract them” (CNBC Make It). Yet, oftentimes, managers will increase the prices of otherwise affordable drugs in an effort to expand profit yields. Prices of essential generic drugs have skyrocketed as a result, with consumers spending “billions in higher out-of-pocket costs” and prices inflating from 13% to 20% (USC Schaeffer). Oshmyansky and Cuban’s business model centers around cutting out these pharmacy benefit managers entirely. Cost Plus Drugs (CPD) works directly with generic drug manufacturers to secure contracts at “wholesale prices”. After this, CPD charges a mere 15% markup and an $8 shipping and handling fee.
Still, CPD seeks to expand further, specifically into the realm of brand-name drugs. This, however, is a more difficult route. Brand-name drug manufacturers can charge freely for their product, causing them to be significantly more expensive than generic drugs. Yet, the cost is subsidized to the same pharmacy benefit managers that CPD’s business model side-steps. These managers are offered rebates by the drug companies in exchange for pushing more of their product, which they then share with their affiliated insurance companies. Since CPD avoids these managers altogether, manufacturers have little to no reason to offer the company rebates.
Cuban and Oshmyansky, therefore, must reach the point of building enough capital to rival insurance companies. They have taken finite steps to do so, including signing multiple brand-name manufacturers and building a “22,000 square-foot factory in Dallas” that will open by the year’s end.
Who will this help?
The pharmaceutical industry in America is notorious for its excessive prices on widely used medication, despite many companies receiving government aid through funded research and tax breaks. Pharmaceutical industries, however, continue to maximize profits by increasing their prices at the expense of Americans. Patents, in addition, are used by pharmaceutical companies to monopolize their drugs, allowing them to keep their prices high without competition.
Americans are at the mercy of big pharmaceutical companies, whose potentially life-saving drugs are becoming increasingly inaccessible. Over 1,800 drugs increased in price in 2021 and again in 2022 (Gardner). Even for insured people, co-pays, deductibles, and cost sharing make effective forms of treatment unfeasible. For those paying out-of-pocket, prescribed medication can cost them up to thousands. For many, this is not an affordable expenditure and they feel as if they are better off not taking the treatment (Kalota). The lack of treatment they receive, of course, impacts their health and decreases the rate or even the likelihood of recovery.
Lower income, typically racially marginalized communities, are disproportionately affected by this burden. Structural racism impacts the accessibility of health care for low income minorities. A lack of education, language barriers, and socio-economic factors - just to name a few- contribute to the unequal access to medication by minorities, who already face a myriad of inequities. This additional stressor of expensive healthcare and even more expensive medicine, coupled with higher chances of contracting communicable diseases and illnesses puts them at an even greater disadvantage (Hayes-Bautista). It is these communities especially that can benefit from pharmaceutical companies, such as Cost Plus Drugs, that provide better access to affordable medication.
Will this be effective?
In the end, Mark Cuban’s acute business mind and widespread celebrity status has caused CPD to make profound waves in the pharmaceutical industry. Although CPD may have issues surrounding pharmacy benefit managers, it has simultaneously called attention to their unfair practices and lax regulations. Cuban’s mission has also helped thousands of individuals become aware of heightened medication costs and encourages them to make more informed decisions when purchasing essential drugs (Drug Topics). By coming at the pharmaceutical industry full-force, Cuban makes sure that everyone from pharmaceutical executives to the average consumer hears his message loud and clear.
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