When Your Meds Become 10x Cheaper
Mark Cuban launched an online pharmacy offering common, life-saving medications that are half the price elsewhere (link). The Mark Cuban Cost Plus Drug Company (MCCPDC)—say that 10x fast—achieves such cost savings by removing health plans and outside middlemen, known as Pharmacy Benefit Managers (PBMs). Someone had to cut them out eventually, right?
Here’s How It Works
MCCPDC cuts out third-party PBMs by making this a cash-only pharmacy—no health plans allowed. In general, PBMs negotiate with health plans, pharmacies and drug manufacturers over which drugs the PBMs will include on formularies, the price of those drugs and the rebates they’ll earn for selling those drugs to pharmacies. Negotiations between these players are far from transparent and lead to rising drug prices (link). So, by cutting the middlemen you’re also cutting the shady drug pricing negotiations.
Everything else, including drug manufacturer, wholesaler and pharmacy is under one roof, meaning MCCPDC has complete control over its drug supply chain and, therefore, pricing. Note that Truepill is running the manufacturing until MCCPDC finishes building its manufacturing plant in Dallas (link).
Now You See Me
The company’s revenue model is transparent: MCCPDC charges for the manufacturing costs (quite inexpensive), a $3 pharmacy labor fee and a 15% markup. These charges make the drugs remarkably less expensive than what you’re currently spending right now with insurance.
I’m bullish on this company and its steps to removing costly inefficiencies in the drug supply chain. Some articles on MCCPDC mentioned GoodRx as a potential competitor since both tackle the price transparency problem. They may be competitors, but the two companies are fundamentally different. GoodRx doesn’t touch the drug supply chain but rather offers drug coupons and finds pharmacies selling cheaper drugs. MCCPDC is tackling the drug supply chain head-on.
At the end of the day, MCCPDC will be a PBM for health plans, a wholesaler for its pharmacy and a drug retailer for its customers (link). It will own the drug supply chain. Other PBMs and pharmacies should feel a bit nervous. I’m itching to use MCCPDC to save $900/mo (not kidding) on my medications, and I’m sure others are too (link).