What Mark Cuban learned from a $141K oversight

Billionaire entrepreneur Mark Cuban's generic drug company launched an online pharmacy in January 2022, and as he has spent more time in the healthcare industry, he has been vocal about lessons learned along the way. 

Mr. Cuban's Cost Plus Drug Co., which he co-founded with Alex Oshmyansky, MD, PhD, initially launched with a few dozen discounted generics. The company now offers more than 2,000 medications, partners with hundreds of independent and grocery chain pharmacies, and manufactures its own drugs. Dr. Oshmyansky and Mr. Cuban had the initial plan to sell pharmaceuticals at their manufacturing price, plus a 15% markup, $3 pharmacy labor fee and free shipping. Cost Plus Drug Co. now has a $5 labor fee and a $5 shipping fee, and it offers drugs at lower costs than what is typical through insurance by selling directly to consumers or through employer-sponsored programs

In one example Mr. Cuban gave Fortune, the difference between Cost Plus Drugs' price and the price he'd been paying for employee prescriptions was $141,000. 

"What we spent $160,000 on at the [Dallas Mavericks], we could have purchased for $19,000 for Cost Plus," he told the publication. 

The company's progress in recent years intensified Mr. Cuban's involvement with healthcare, the pharmaceutical industry and business leaders, many of whom don't understand healthcare coverage, he told Fortune March 4 after participating in a White House roundtable discussion on lowering healthcare costs and bringing transparency to the role of pharmacy benefit managers — the drug pricing middlemen business that's dominated by six companies.

"Even though health insurance costs are the second-largest line item after payroll, CEOs don't really understand it or know anything about it," Mr. Cuban told Fortune. "You have employees that are more worried about whether their kids can get their medications paid for by the company insurance, or whether they're going to be able to get the surgery that they know they need and that the doctor recommends, but the insurance company is not approving."

A report from the PwC Health Research Institute released last year estimated that healthcare costs will increase by 7% in 2024. The report estimated the increase in per-capita costs of medical services and prescription drugs that affect payers' group and individual plans. At the same time, a report released last year from Aon projected average costs for U.S. employers that pay for employees' healthcare will increase 8.5% this year to more than $15,000 per employee.

Amid these projections, Mr. Cuban and Dr. Oshmyansky accused PBMs of prioritizing profits over patients, according to Fortune, while the Pharmaceutical Care Management Association, a trade organization representing PBMs, blames drug manufacturers. The association's website states that "specific price concessions that allow drugmakers to realize they can discount less" is one contributing factor to increased drug costs.

Mr. Cuban's companies "walked away from the traditional way" of healthcare coverage and do not work with PBMs that deal in rebates, he told Fortune

"Everything we just pay for on a transactional basis, and they do what we tell them to do," Mr. Cuban told the publication. "That was an easy switch."

Mr. Cuban now uses AffirmedRx, a pass-through PBM.

Read Fortune's full report here

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