Celebrity entrepreneur Mark Cuban wants to make buying drugs less complicated and more affordable, and an online pharmacy he recently invested in aims to do just that. So how does this work, and is it enough to solve the drug pricing problem in America?
Radio Advisory's Rachel Woods sat down with pharmacy experts Gina Lohr and Chloe Bakst to discuss this business model and how it could work for patients.
Read a lightly edited excerpt from the interview below and download the episode for the full conversation.
Rachel Woods: Mark Cuban is following a trend that we've been talking about a lot on this podcast, which is non-health care entities getting into health care. The world of drugs is particularly challenging and bureaucratic and complex. I guess my question is, why drugs? What is the problem that Mark Cuban is hoping to solve that he believes his company can actually get out ahead of?
Chloe Bakst: I think that Mark Cuban is trying to solve a couple of problems here. The first is that he's really trying to cut out the middleman, the pharmacy benefit manager, who's primary job is to negotiate drug prices with manufacturers on behalf of health plans so that they can get to patients.
Along that supply chain when the drug makes its way to the patient—I think this is the second part of the issue that Mark Cuban's trying to get at—is the fact that the cost that the patient pays at the pharmacy counter might not reflect necessarily the price that the PBM is negotiating with the manufacturers. So by cutting out that PBM, Mark Cuban's able to potentially provide lower cost drugs to the consumer without sort of the complexity that the PBM brings to the table.
Woods: My question is of all of the things that an outsider could get into in health care, why drugs? What is the problem that Mark Cuban is hoping to solve?
Bakst: Why drugs? Right off the bat, maybe a cynical answer is because there's a lot of money in drugs and you can sort of come off as the good guy and offer lower prices and still make a 15% markup on every transaction.
What I think is maybe the more moral answer is that it is very complex. There are a lot of players, middlemen, pharmacy benefit managers, other stakeholders who add that complexity. And what Mark Cuban's trying to do is simplify it as that external disruptor coming in, offering these lower prices in a very transparent way and hoping to get more patients access to their medications.
Woods: And there's the very clear consumer angle of drug prices are through the roof and consumers, patients, purchasers want lower prices for their pharmaceuticals. How exactly is Mark Cuban's Cost Plus Drugs able to actually act as a middleman and make a profit while also offering such lower prices for people?
Gina Lohr: So I think it's really important to flag that he is only doing this for generic drugs right now, so it's one type of transaction that he's focusing on. And with generic drugs, you have so many different players in the supply chain, getting the drug from the manufacturer to the patient, who's taking the drug at the end of the day. You have the distributor in there, you have the pharmacy benefit manager, and you have the pharmacy who are all playing a role in sort of marking up the price a little bit.
And so by being the pharmacy and going directly to the manufacturer and promising a level of scale, he is cutting out any PBM markups and any distributor markups on those prices, and then promising transparency to take that price straight to the patient.
Woods: I don't want to be the cynic here, but I guess what's the catch? I mean, one you just mentioned Gina, which is, we're just talking about generics, so it's not even all generics. But this sounds very much like a white knight who's coming in, but that can't be true.
Lohr: I think if you're a patient who takes one or a handful of drugs and they're all generics and you can just switch your pharmacy wholesale to Mark Cuban's pharmacy, it might be a great deal for you, but I think there are some downstream implications, both at the patient level and societally that it's important that we talk through.
If you're a patient, then anything you spend on your drugs through Mark Cuban's pharmacy isn't going to be building toward your deductible for the year. And so if you're a patient who is counting on that spend to get you to the deductible faster so that you're paying less later on, you're not going to get that benefit.
Bakst: Also, adding to Gina's point, where you often need most savings as a patient are not on those generic drugs. You need savings on those brand name drugs, those specialty drugs, that's where your copays are going to be the highest.
So, although there is a benefit to getting lower-cost generics—and I'm not saying that you can't spend a lot of money on generics, you certainly can, especially a lot of prescriptions, but that's not where the biggest pain points lie.
Woods: What you're getting at is the reality of just how complex the system is. And even as good as Cost Plus Drugs intends to be while also making money, we are talking about an entrepreneur here, it's not a perfect solution.
So let's spend a little bit more time talking about some of these ripple effects. Maybe there are unintended consequences. Fragmentation is a big one that you just mentioned, Gina. What are some other consequences that the industry is just going to have to grapple with even as lower cost drugs through this online marketplace is a benefit for at least some people?
Lohr: Something else that I'm paying attention to or thinking about with Mark Cuban, as well as other digital disruptors that sort of take national scale to lower prices for patients, is sort of a question of what's the impact on retail pharmacies, community-based pharmacies.
Is this going to take just enough more volume from them that they're not able to keep their doors open anymore? We hear a lot of talk about retail pharmacies struggling. I think they're also trying a lot of strategies to stay afloat. So it's unclear what will be the straw that breaks the camel's back, but it's certainly worth thinking about what's the role of that local pharmacies in this.
Bakst: So Gina just mentioned fragmentation, and I think an important part of that fragmentation is the fact that many patients, I think the average patient on Medicare has about 50 prescriptions. We already discussed that you can't get all of those prescriptions filled most likely at Mark Cuban's drug company.
So you're going to have to necessarily split your medications across different pharmacies, and that can really impact medication management, pharmacist insight into any potential side effects that could conflict or be additive. And you lose that element of care that a pharmacist can bring to the table when they actually have the insight into and across all of a patient's prescriptions.
Woods: Which, a reminder, if our listeners missed the conversation that we had with Walgreens a couple of weeks ago, we were reminded that the patient-pharmacist relationship is actually incredibly strong and can be deeply loyal, on par with, if not greater than, the relationship with somebody like your primary care physician. So that's not something to discount.
Look, none of those ripple effects are small. So I guess my question is, do you recommend that real people use this service, or is this a flash in the pan that's making good headlines and getting a lot of retweets on Twitter, but maybe isn't ready for the market?
Lohr: I think Mark Cuban's pharmacy is filling a huge need for some patients. Certainly, there are people in my life that I care about, who I have recommended they go and look up their prescriptions and look to purchase them through Mark Cuban's pharmacy because purchasing the copay cost for their generic drugs is high, might be a barrier to them being adherent to those drugs.
And comparing their copay through a variety of health plans to their costs through Mark Cuban's pharmacy, especially if they were to get a 90-day fill, it's lower. They're going to save a lot of money, and maybe that will make the difference between them being able to take these life-saving medications or not.
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