A shark comes for the pharmaceutical industry

February 24, 2023- by Nicole Russell -  A little over one year ago, Mark Cuban, the entrepreneur, Shark Tank investor, and one of America’s most famous billionaires, opened the “Mark Cuban Cost Plus Drugs Company.”

The company is an online pharmacy aimed at shaking up the generic drug market and, according to Cuban, is something that has turned out to be one of his most important investments to date. The Washington Examiner recently spoke to Cuban to see how his venture has fared so far and if he’s disrupting the pharmaceutical industry as much as he’d planned.

The cost of prescription medicine is a burden for many people. In 2019, the United States spent approximately $1,615 per person on prescription drugs. Prescription drug prices in the U.S. cost 2 1/2 times more than they do in 32 other countries, according to a June 2022 survey from the Department of Health and Human Services. Cuban said he has long been interested in healthcare in America, frustrated with rising costs and, specifically, healthcare insurance.

A few years ago, Alex Oshmyansky, a child prodigy-turned-radiologist with a doctorate in mathematics from Oxford University and a medical doctorate from the Duke University School of Medicine, approached Cuban with the idea. After watching disgraced pharmaceutical CEO Martin Shkreli increase the cost of his company’s antiparasitic drug from under $14 to $750 per pill, Oshmyansky thought there must be a way to procure much-needed pharmaceutical drugs and sell them wholesale. After a few attempts to start a company that would do just that, he finally cold-pitched Cuban via email for the funds needed to match his vision. Now, Oshmyansky is the founder and CEO of the Mark Cuban Cost Plus Drug Company, the only one of Cuban’s business ventures to which he actually lends his name.

How does it work? “All anyone has to do is go to costplusdrugs.com and put in their medications and see not only if we can save them money, but you will see our actual cost, our markup of 15%, and the shipping and pharmacy fee," Cuban said. "You can use us with or without insurance and even if you are on Medicare. We are often lower cost than your deductible!”

The company is a registered pharmaceutical wholesaler, so it negotiates with drug manufacturers for a low price and bypasses other secondary middlemen distributors. In doing so, Cuban’s company is able to avoid large markups on generic medicine so that customers buying from them receive their drugs for a fixed price that includes, as Cuban noted, a 15% margin, a $3 pharmacist fee, and a $5 shipping fee.

One of Cuban’s best examples of savings is the drug imatinib, sold under the brand name Gleevec, often prescribed for adults and children with leukemia. A month’s supply can cost patients upward of $2,500, an enormous financial burden. At Cost Plus Drugs, the same medicine is $14 a month. Mesalamine, the generic brand for Canasa, is a medication used to treat inflammatory bowel diseases, such as ulcerative colitis and Crohn's disease. A month’s supply retails for nearly $800, but it sells at Cost Plus Drugs for just about $27. More common drugs are available, too. Sertraline, the generic name for Zoloft, often used to treat depression or anxiety, retails at around $74 per month. At Cost Plus Drugs, it’s less than $4.

Yet Cost Plus Drugs is not always the cheapest option. Kaiser Health News recently took a collective sample of generic drug offerings from Cost Plus Drugs’s website and compared the prices of those same medications at various pharmacies around the Washington, D.C., area, using the comparison-shopping site GoodRx. As reported by the Dallas Morning News, in 141 instances of the 211 drugs compared — each of the drugs offered on Cuban’s site that began with the letter “A” — Kaiser Health News found cheaper options available in local pharmacies listed on GoodRx than offered by Cost Plus Drugs. It did note that in the 70 instances in which Cost Plus Drugs was cheaper, the savings were often substantial.

Cost Plus Drugs doesn’t accept insurance, meaning drugs are paid for out of pocket. For people purchasing really expensive drugs, this could push Cost Plus Drugs out of the equation. For very cheap drugs, too, something as minor as the $5 shipping fee could make the price of certain drugs on Cuban’s website more expensive than at local pharmacies where shipping is not required. The drugs are also generic, although the Food and Drug Administration suggests generic medicine is just as effective if key ingredients remain in the off-brand. A company called Truepill fills the prescriptions and delivers medications from the manufacturer to the consumer.

In just a year, the company went from offering 100 generic drugs to over 1,000, according to Cuban. Adding more drugs has paid off. Cuban said Cost Plus Drugs is now “near 2 million accounts in less than 13 months. We have more than 1,000 [stock keeping units] available.” EpiPens and insulin are next on the wish list. Already, Cuban explained, his online pharmacy has “surpassed my expectations 100 times.”

The cost and convenience of Cost Plus Drugs ensure it is a direct competitor of stores such as CVS and Walgreens. In fact, it’s been so successful that another competitor has already emerged: Amazon’s RxPass. RxPass is available to Amazon Prime members and gives them access to common generic medications for a flat fee of $5 a month. However, so far, it only has 50 generic medications, and it does restrict eligibility based on insurance and the state where medications will be shipped. People with Medicare or Medicaid are ineligible, and several states are excluded.

Cuban is unfazed by Amazon’s imitation pharmacy and believes his company remains a notch above. “Anything that lowers the cost of meds is good,” he said. “But we don’t have any membership or monthly fees. And with costplusdrugs.com, your doctor can prescribe three, six, nine, or 12 months supply that can cost less than Amazon.”

Yet these industry disruptors like Amazon’s and Cuban’s do share similar hurdles in their ability to compete with traditional pharmacies: Chief among these are that Cost Plus Drugs and RxPass alike are focused on mail delivery, which, as the Wall Street Journal’s David Wainer summed up recently, “isn’t going to replace the physical pharmacy anytime soon.”

The main thing that sets Cost Plus Drugs apart from competitors, according to Cuban, is the mission-driven vision he and Oshmyansky share: “Every other drug company wants to maximize revenues,” Cuban said. “We don’t. I want to maximize impact. We want to be transparent and show our cost of goods sold. No one else is willing to do so. That’s why no one has done this before. It’s insane that in the USA in 2023, people have to choose between rent, food, and medicine. We want to end that.”

A shark in the tank he may be, Cuban views altruism and capitalism as entirely compatible. “For me, capitalism means just being able to start a company or run a company and accomplish the goals that are important to me. It’s not just about making as much money as you want to make,” he said in a 2022 Forbes interview. “Gen Zers and younger millennials that are coming on to pitch us businesses, there’s always a social construct, there’s always a social mission.”

Speaking of capitalism, Cuban’s business acumen and his interest in politics have long made him a favorite to run for political office. It was rumored he thought about throwing his hat in the ring in 2016. What about 2024? “No chance,” he said, writing it off without a second thought.

Like many outside the Beltway, especially those who started in technology, Cuban does not have a strict political ideology leaning one way or the other. He favors free markets but believes a strong government is necessary for society. “I don't particularly care what either party does,” he said. “If it were up to me, I would get rid of all political parties.”

Speaking at the Dallas Regional Chamber’s annual meeting in January, Cuban said the growing success of Cost Plus Drugs shows just how capitalism finds solutions where the government fails. “The best way to teach politicians how to do things is by growing a business because that’s the one thing they pay attention to,” he said. “They see where the money is, figure out what’s working and what’s not. By learning what to do, we can help make our city or state or country better.”

Nicole Russell is a contributor to the Washington Examiner's Beltway Confidential blog. She is a journalist in Washington, D.C., who previously worked in Republican politics in Minnesota. She is an opinion columnist for the Fort Worth Star-Telegram.

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SOURCE: https://www.washingtonexaminer.com/politics/a-shark-comes-for-the-pharmaceutical-industry

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