The Mark Cuban effect on drug pricing

In January 2022, entrepreneur and "Shark Tank" star Mark Cuban launched an online pharmacy that priced 100 medications by their manufacturing fee, a 15% markup, and a shipping and handling fee. Less than two years later, Express Scripts and CVS are following suit. 

Drug prices in the U.S. are, on average, 2.5 times higher than 32 other countries, according to a 2021 study. It's a complicated system, with drugmakers assessing their products through the revenue they receive from distributors and pharmacies, called the average manufacturer price, according to GoodRx. When pharmacies buy from distributors, they negotiate the sticker price — which is why the same cold medicine can have different costs depending on the pharmacy counter. 

The average wholesale price from a distributor is then run through a formula — for example, acquisition price plus 20% markup plus a $5 pharmacy handling fee. That number is then given to insurers, who hand it off to pharmacy benefit managers who handle prescription claims.

Most countries regulate pharmaceutical companies' drug prices; the U.S. largely doesn't, with a few exceptions, such as CMS. As drug costs climb, more than 75% of health system pharmacy leaders think ultra-high-cost drugs will force them to cut service lines. 

A shift is brewing, though, as Mark Cuban, Express Scripts and CVS work to make drug pricing more transparent. 

Cigna Group's Express Scripts, one of the biggest pharmacy benefit managers in the U.S., will launch a new drug price service in 2024 that sells medications based on their acquisition, pharmacy dispensing and service costs.

The service, called ClearNetwork, will be available for its pharmacy network that has handled more than 1.1 billion prescriptions in the first nine months of 2023. 

On Dec. 5, CVS Pharmacy swung its bat with CVS CostVantage, a pharmacy reimbursement model that accounts for a drug's cost, a pharmacy services fee and a set markup. The new service will be available in 2024. Caremark — CVS Health's PBM — will also launch TrueCost in 2025, which aims to increase transparency into administrative fees by including the net cost of prescription drugs. 

Two other large healthcare payers, UnitedHealth Group and Elevance Health, are also joining the fray. In January, UnitedHealth Group's Optum Rx rolled out a price matching tool reminiscent of Target and Best Buy. The service scans drug prices and automatically provides the lowest available pricing. Elevance Health is also set to launch a digital and home delivery pharmacy subsidiary in 2024, which allows users to compare medication costs.

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