Cutting out the middleman, how Mark Cuban's online pharmacy saves you money
DALLAS (CBSDFW.COM) — Who decides how much you pay for prescription medicines? It's a question with a very complicated answer. Now, Mavericks owner Mark Cuban is hoping to simplify the process and save you money by opening his own pharmacy.
"Everybody knows somebody, or they've experienced it themselves where they've had to choose between rent, food, or rationing their drugs," said Cuban. "And that's just crazy in the United States of America in 2022."
Cuban helped launch Cost Plus Drugs in January. It's an online pharmacy with no storefronts that offers more than 1,000 generic drugs. The business model is built on transparency. Each drug profile breaks down how Cost Plus determines its price: cost plus a 15% markup, $3 pharmacy fee, and $5 for shipping.
"We get people coming to us and saying 'your price is $10, my co-pay is $20,'" said Cuban. "'So I'm ignoring my insurance and coming straight to you.'"
Cost Plus does it by negotiating directly with drug manufacturers and cutting out the middleman. "There's a third party - pharmacy benefit managers."
Here's how it works: insurance providers hire pharmacy benefit managers to handle drug benefits for their health plans. PBMs develop lists of drugs that are covered by insurance. Those lists, called formularies, typically contain the drugs most recommended to patients.
Manufacturers want their products recommended, so they will often offer discounts or rebates to PBMs as an incentive. PBMs will pass along some of that rebate money to insurers, but it's not clear how much.
PBMs also negotiate payments to pharmacies and collect the co-pay that you pay when getting your medicine.
This chart shows the flow of money, products and services that takes place before you walk up to the pharmacy counter.
There's another layer to all of this. For decades PBMs were independent companies, but in the last decade they have merged with others in the healthcare industry. These days in many cases PMBs, insurance providers and pharmacies are all owned by the same company. According to the Center for Insurance Policy and Research the three largest PBMs in the country manage prescriptions for 89% of the market.
State Representative Cody Harris says that's a problem. "There's no question to me, it's a monopoly now."
Rep. Harris is the author of HB 1919, a new law that bans PBMs from steering patients to their own pharmacies. He says when companies charge other pharmacies more to fulfill the same prescription, it's reducing choices for patients. "A good example [of steering] would be if the PBM said, 'if you buy this prescription from us at our pharmacy we'll charge you $2. But because we own the health plan and we decide how much we pay for this drug, if you go anywhere else you get charged $10.'"
Harris says the law was intended to increase transparency and competition by giving patients more choices. But the Texas Association of Health Plans -- a critic of HB 1919 -- says it has had the opposite effect.
"I would consider it anti-competitive," said Blake Hutson, a TAHP spokesperson. "You know, you really ought to be able to direct people to the lowest cost option. That's all patients really care about."
Rep. Harris says a social media campaign has already begun to push for changes to HB 1919 in next year's legislative session. His office provided screenshots of ads that claim the law is increasing patient co-pays. One of the ads is by the group Texans for Affordable Rx.
When CBS11 tried to contact the group we were directed to the Pharmaceutical Care Management Association, a Washington, D.C.-based organization that represents PBMs across the nation.
PCMA would not agree to an interview but sent us a statement that included the following:
"To achieve the shared goal of reducing prescription drug costs for patients, it is essential that Texas' regulatory environment encourages innovation for the entire prescription drug supply and payment chain. Enactment of new mandates that restrict cost reducing tools is counterproductive and only increases costs for patients."
Read the full statement below.
One thing Harris and Hutson can agree on: Cuban's pharmacy is a good thing.
"What I love about Mark's model is, it's market-driven and transparent," said Harris. "That's exactly what we were trying to accomplish in HB 1919."
"We are 100% for more competition and more innovation," said Hutson. "People want lower priced drugs and anything in the market that's achieving that goal for patients and for employers is awesome."
Cuban says if you don't see your prescription on the Cost Plus website, you can send it to them as a suggestion. He's hoping to add brand name medications in the coming months. As of now, Cost Plus stocks neither insulins nor controlled substances.
"We have a very straightforward mission: to be the low-cost medication provider. Period. End of story."
Full statement from PCMA:
"On behalf of Texas patients, Pharmacy Benefit Managers, PBMs, are working to reduce prescription drug costs, expand access to medications, and improve patient outcomes.
The PBM marketplace in Texas and nationwide is highly diverse and competitive. In fact, there are 70 PBMs currently active in the U.S. marketplace and six PBMs have opened since 2019, an increase of 10 percent. It's also important to note that employers, public programs are free to change PBMs all the time, or not use one.".
To achieve the shared goal of reducing prescription drug costs for patients, it is essential that Texas' regulatory environment encourages innovation for the entire prescription drug supply and payment chain. Enactment of new mandates that restrict cost reducing tools is counterproductive and only increases costs for patients."
PCMA's research on the PBM marketplace can be viewed below: