Mark Cuban’s Cost Plus Drug Company ‘flying under the radar’ after 2 years
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The Mark Cuban Cost Plus Drug Company launched in January 2022 to a flurry of promises, curiosity, and a certain guarded optimism among experts regarding its potential to lower medication prices for patients.
Two years down the line, the company, helmed by billionaire entrepreneur and Dallas Mavericks minority owner Mark Cuban, has had both slam dunks and airballs.
“In December 2023, they added another 1,000 medications to increase the list to 2,200,” John R.P. Tesser, MD, FACP, of Arizona Arthritis & Rheumatology Associates and Midwestern University, told Healio. “Impressive. This includes a number of medications in the rheumatology space.”
However, despite Cuban’s public prominence — and a business model that promises to cut out “pharmacy middlemen” via negotiating directly with manufacturers — the company may not be making as big an impact on the drug supply chain as initially thought, according to Tesser.
“It has not marketed itself well to physicians, at least not to me and my colleagues, I believe,” he said. “None of the 60-plus providers in my group have mentioned it, although a handful indicated to me they have prescribed through it when I surveyed them.”
Tesser added that none of his colleagues, in various meetings around the country, have talked or indicated that they are using Cost Plus.
“Contrast this with Evernorth, an Express Scripts company similarly offering discount pricing on medications, which is advertising on television,” he said.
Meanwhile, Cost Plus advertising in peer-reviewed journals or “throwaways” has been lacking, or nonexistent, according to Tesser.
“They are not advertising to the public at large,” he said. “They are definitely flying under the radar, despite boasting some 2 million members.”
However, a low profile does not mean that the company is not effective, according to Robert W. Levin, MD, past president of the Florida Society of Rheumatology, president of the Alliance for Transparent and Affordable Prescriptions, and associate affiliate professor of medicine at the University of South Florida. Specifically, its array of generic drugs available for reduced prices is genuinely commendable, he said.
“One expectation the company has met is that the prices are really excellent on generic medications,” Levin said in an interview. “That is where they have succeeded the most.”
Although biosimilars are not the same as generics, Levin added that Cost Plus offers great deals on some biosimilar medications that can benefit rheumatology patients — an initial footprint may expand in coming the months and years.
However, the company has also been lackluster in many respects, according to Levin. Aside from media exposure — which Levin agreed has been less prevalent than he expected — Cost Plus has also fallen short regarding specialty drugs.
“The other place where he has not met expectations is in the brand name specialty drug market,” he said.
This market, of course, is of particular interest for the rheumatology community. Taking stock of the company’s current inventory and recent activity may shed light on the impact it may have moving forward.
‘Curious and skeptical’
“I was curious and skeptical about Cuban’s venture when it first began,” Tesser said. “The real question was how to crack the big three pharmacy benefit managers.”
Those “big three” refer to CVS Caremark, Express Scripts and OptumRx, the largest pharmacy benefit managers (PBMs) in the United States.
“Even for a billionaire like Cuban, I anticipated that it would take time to increase the list available drugs, and, at first, he would offer a very limited number of primary care scripts,” Tesser added.
The challenges of successfully executing such a massive operation would also take time to address. However, early additions to the formulary — such as azathioprine, colchicine, hydroxychloroquine and mycophenolate mofetil — gave Tesser hope that there could be benefit for the rheumatology community, he said.
According to Levin, it is not for lack of effort that Cost Plus has failed to make a significant breakthrough in the brand name specialty drug market.
“The issue is that the small-molecule generic market is so much easier,” he said. “These drugs can be made and sold cheaply but the prices are grossly inflated by PBMs. When Cuban started offering them at such low cost, providers and patients had no incentive to pay more for them through the PBMs.”
Although Levin said he is encouraged by the inroads the company has made into to biosimilar market, he added that Cost Plus still has room for improvement in that area as well. For example, the Humira (adalimumab, AbbVie) biosimilar Yusimry (adalimumab-aqvh, Coherus Biosciences) is available for $569.27 plus dispensing and shipping fees on the Cost Plus site. By comparison, the same dose of originator Humira costs $6,922 retail.
“Of course, a price under $1,000 a month is considerably better than what these drugs go for in other places, but there are still not many patients who can buy a medication for $500 or $600 a month outright,” he said.
Tesser said he hopes to eventually see tocilizumab (Actemra, Genentech) biosimilars emerge on the Cost Plus formulary, along with generics for tofacitinib (Xeljanz, Pfizer).
“Many other biosimilars have a long way to go until the end of patents,” he added.
However, Like Levin, Tesser expressed uncertainty about the timeline for Cuban to crack the biologic market.
“Who knows how long it will take, but if he ever can get into this market, it is likely to take a long time — maybe years,” Tesser said.
‘A boost from legislation’
Despite its flaws, the benefit of the current PBM/insurance carrier system is that, for many patients, the complex web of rebates and copay assistance actually allows them to afford biologic and biosimilar medications. However, Cost Plus may be making moves to upend this paradigm.
In August 2023, Blue Shield of California negotiated with Cost Plus and Amazon Pharmacy — another online pharmacy, and a subsidiary of Amazon — to deliver prescription medications to subscribers.
“I am excited to see anyone dumping CVS or the other pharmacy benefit managers,” Levin said.
It is worth noting that the California Blue Shield model only includes generic medications and not brand name specialty drugs, but Levin suggested this could be the start of a more comprehensive negotiation strategy.
According to Levin, the big question is whether Cost Plus will lead to other such companies entering the fray with a similar business model.
“Mark Cuban does not need to make money, he can fund all this himself,” he said. “Other companies would have to get venture capital, so then there would be a profit motive. Cuban is in a unique situation in that he is not beholden to anybody, so it would be difficult to duplicate.”
That said, because of Cuban’s deep pockets, Levin said he sees Cost Plus as having the potential to make “big progress” in the industry.
“They have opened a manufacturing plant to start providing and making drugs that currently face shortages,” he said.
That 22,000-square foot facility, located near Dallas, became operational in 2023 and will primarily manufacture generic medications, according to the Cost Plus site.
“It seems that was always part of his plan, to manufacture and not just buy medications,” Levin said. “By manufacturing them himself, he can cut out the middlemen and really cut costs — and maybe take a bigger bite out of the PBMs.”
Despite the magnitude of this endeavor, Levin once again stressed that Cuban has largely avoided advertising. However, that does not mean that the word should not get out.
“The Coalition of State Rheumatology Organizations (CSRO) has created a toolkit to talk to employers about their insurance carriers and PBMs,” said Levin, who is a member of the CSRO board of directors. “We want to educate human resources and other decision makers about how using companies like Cuban’s can save them money on prescription drugs.”
As these efforts expand, it would be interesting to see if other entities can keep the momentum going.
“If others like GoodRx and Amazon really make themselves known to the general public and physician community, the PBMs could take a hit,” Tesser said. “But I think these endeavors would need a boost from legislation that begins to limit the control that the PBMs have exerted on the health care sector and society at large.”
Despite an ongoing Federal Trade Commission inquiry into pharmacy benefit managers, and the announcement of a bipartisan Senate plan to regulate PBM compensation, significant legislation reforming PBMs and drug pricing is speculative at the moment. Levin encouraged rheumatology providers to continue to educate themselves about Cost Plus and use it whenever possible.
“The future may change things,” he said. “I am optimistic, but we will see how this plays out.”
References:
Blue Sheild of California unveils first-of-its-kind model to transform prescription drug care; save up to $500 million on medications annually; Aug. 17, 2023; Accessed April 3, 2024. https://news.blueshieldca.com/2023/08/17/pharmacy-care-reimagined
Mark Cuban Cost Plus Drug Company manufacturing site. https://www.markcubancostplusdrugcompany.com/
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