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Op-Ed: Mark Cuban shows how the free market helps patients

By Sally Pipes | Pacific Research Institute

Billionaire investor Mark Cuban is known for his razzle-dazzle. Not only has he backed a long string of tech, media, and cryptocurrency companies, he also owns the Dallas Mavericks basketball team and is a TV star on "Shark Tank."

Getting into discount drugs might not have seemed like an obvious next move for Mr. Cuban. But that's exactly what he did last month, when he launched Mark Cuban Cost Plus Drugs.

The company's goal is to offer safe and affordable medicines at transparent prices. It's a noble cause, given that one in four Americans has trouble affording their prescriptions.

Cuban has clearly observed that the inflated prices consumers pay for generic medicines are ripe for disruption. Congress should take note of his strategy.

Cost Plus offers more than 100 generic prescription medicines, many at eye-popping discounts.

Take fluoxetine, the generic equivalent of Prozac, a treatment for depression. A 30-day supply of the generic normally retails for $21.92. You can get the same thing from Cost Plus for $3.90.

A 30-count supply of the cancer drug imatinib sells for $17.10, compared to a whopping $2,502.50 at other drug stores.
 


The list goes on. Cost Plus requires consumers to pay for medications out of pocket and doesn't process insurance claims. But its drugs cost less than most patients would pay elsewhere even with insurance.

How are these discounts possible? Cuban isn't selling products at a loss. His company is just bypassing drug-industry middlemen and their exorbitant markups.

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A new study by the Berkeley Research Group shows how steep those markups are. More than half of gross drug expenditures – the total spent on prescription medicine at the consumer end, either by patients or their health plans – goes to middlemen.

Those middlemen include insurers, hospitals, pharmacies, the government, and pharmacy benefit managers – murky go-betweens who use their buying power to extract discounts from drug makers while seldom passing the savings to consumers.

The study found that the share of drug spending going to middlemen is rising. From 2013 to 2020, their portion of the intake from drug spending rose from 37% to 51%.

In other words, middlemen have been taking in more and more – with zero benefit to consumers.

Cuban deserves credit for creating a business model that not only saves consumers money on their medicine but shows the extent to which middlemen have been ripping off patients.

For years now, Congress has debated how to rein in the predatory practices of pharmacy benefit managers, with proposed bills that would require greater transparency. But the private sector is now leading the way. Cuban's company could serve as a model and first step for fixing the price-inflated status quo.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

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