DALLAS, TEXAS - JANUARY 30: Owner Mark Cuban of the Dallas Mavericks at American Airlines Center on ... [+]
Transparency is the buzzword in healthcare. It’s easy to understand why. U.S. healthcare markets lack transparency. And, without it, the market cannot operate optimally.
Most stakeholders in the business of healthcare say they like the concept of transparency. But, in reality, many appear to want to keep the healthcare market opaque. Perversely, opacity in healthcare can help boost revenue and profits. It keeps consumers or purchasers in the dark, so it’s not obvious to them where to find a better deal.
Billionaire Mark Cuban is trying to do something about this. Last month, he launched a generic drug company bearing his name; the Mark Cuban Cost Plus Drug Company.
The company’s origins go back to 2018 when Dr. Alex Oshmyansky founded Osh Affordable Pharmaceuticals. Cuban financially backed Oshmyansky’s efforts, and now the company has been renamed.
The firm’s mission statement describes how it is dedicated to producing low-cost versions of high-cost generic drugs. Furthermore, the statement pledges to provide “radical transparency in how drugs are priced.”
Cuban’s company has declared that it will let all stakeholders know what it costs to manufacture, distribute, and market its drugs. According to the website, there will be no hidden costs, no middlemen, no rebates that are only available to health insurers or pharmacy benefit managers. “Everybody gets the same low price for every drug we make.”
The company says it will buy directly from third party suppliers, or manufacture its own products and sell at a steep discount with just a 15% mark-up.
Details are scarce on where the company will initially source its medicines, but it is planning to build a new manufacturing site. On February 5th, Cuban’s company applied for a permit to build an $11 million drug-manufacturing plant in the Dallas area. It is also in the process of constructing a pharmacy in Dallas where it’s hoped that profits from the sale of non-pharmaceutical items can partly fund the procurement and ultimately manufacturing of lower cost drugs, and offer products for rare and neglected diseases directly to patients.
The goal of Cuban’s company is to launch more than 100 drugs onto the market by the end of 2021.
The first product the company is selling is albendazole. Albendazole is an antiparasitic drug that currently has a list price of approximately $225 per tablet.
Cuban’s company says it is lowering the cost of albendazole to just $20. The company website illustrates how it’s making this happen. According to the website, the cost to produce and distribute the drug is approximately $13 per tablet. Cuban’s company adds a 15% profit margin and charges $15 per tablet as a wholesale price to pharmacies, clinics, and hospitals. Subsequently, it sets a manufacturer's suggested retail price of $20 per tablet.
Why is this important? Well, for starters, it’s essential that research institutes, such as the Baylor College of Medicine, have access to affordable doses of albendazole to conduct resource-intensive studies on hookworm infections in the U.S. Additionally, the low cost albendazole product offers an inexpensive treatment to treat hookworm outbreaks in the U.S.
The rising incidence of neglected tropical diseases in the U.S. lends urgency to making medicines more affordable. It’s not known if Cuban’s company will launch other drugs targeting neglected diseases. But, it’s certainly an area of unmet need.
To illustrate, approximately 300,000 people in the U.S. are infected with the protozoan that causes Chagas disease, but less than 1% have received the antiparasitic treatment, benznidazole, approved for this indication. Access to benznidazole is limited. And, it’s both a supply and affordability problem.
The calls for reform of drug pricing,* both in terms of transparency and lowering out-of-pocket costs for patients, have grown louder in recent years. Bipartisan political pressure has heated up. Until now, the focus has mostly been high-priced branded medications. By contrast, Cuban’s company takes aim at pricey generics.
There are of course well-established players in the generics space, such as GoodRx, but also Amazon. Amazon Pharmacy was launched in November 2020, it’s an online pharmacy that offers discounts on prescription drugs. These discounts will be particularly relevant to consumers in the deductible and coverage gap phases of their health insurance, similar to GoodRx.
How disruptive Cuban’s company will be depends on the types of drugs it will sell. It’s unclear at this time whether Cuban’s company will be in direct competition with the established players for a wide range of products, or whether, as it now appears, the firm will focus on niche markets, such as the one for albendazole.
*Hospital pricing has also been under scrutiny, though prescription drugs remain the favorite target of policymakers and politicians in spite of the fact that drugs account for merely 10% of overall healthcare spending.
