How much money could Medicare have saved if they had used Mark Cuban’s online drug company?
A new study found Medicare could have made huge savings had it bought generics drugs using billionaire investor Mark Cuban’s low-cost pharmacy.
The price of prescription drugs over time has been outpacing inflation, in 2020 half of drugs covered by Medicare saw faster-than-inflation price increases. A new study found that inefficiencies in supply chains are responsible for a majority of the price consumers pay for generic drugs.
When comparing the simplified model used by billionaire Mark Cuban’s new drug company, Cost Plus Drugs, the researchers found that Medicare could have saved up to $3.6 billion on generic drugs had the service existed then. That represents almost 40 percent of what Medicare spent on the 89 drugs examined in the study.
“Supply chain retains 64 percent of every dollar spent on generic drugs”
Medicare spends over $115 billion annually on prescription drugs. Researchers at Brigham and Women’s Hospital in Boston analyzed the savings the program could have made in 2020 if the government could have bought 89 generic drugs that were available on Cuban’s direct-to-consumer online pharmacy when it launched earlier this year.
The study published in the journal Annals of Internal Medicine states that Medicare spent $9.6 billion in 2020 on the prescription drugs they were able to compare. Purchasing those same drugs through Cost Plus Drugs would have saved the federal government $3.6 billion, a discount of more than 37 percent.
While the researchers point out that the US achieves major savings through generic drug competition, “the lower prices from a direct-to-consumer model highlight inefficiencies in the existing pharmaceutical distribution and reimbursement system,” the study states.
The supply chain from factory to customer includes wholesalers, pharmacy benefit managers, pharmacies, and insurers. “This supply chain retains 64 percent of every dollar spent on generic drugs, compared with 25 percent of every dollar spent on brand-name drugs before rebates,” according to one estimate in the study.
Cost Plus Drugs’ simplified direct-to-consumer model offers significant savings
Since the study was performed the low-cost pharmacy set up by Shark Tank personality has added many more generic prescription drugs offering over 700 now. By cutting out the middleman and the overhead of a brick-and-mortar store Cuban is able to deliver deep cuts in the price of the medications his company sells.
Cost Plus Drugs is transparent about its business model, stating that it marks up the price of the generic drugs by 15 percent from the manufacturers cost and then tacks on a $3 dispensing fee and a $5 shipping fee. For expedited service customers are charged $15.
The service doesn’t accept insurance, so customers would have to pay for their prescription out of pocket.