MCCPDC had been a registered pharmaceutical wholesaler for more than a year, but initially it only stocked a handful of drugs. It now purchases more than 100 generic medications directly from manufacturers, bypassing middlemen to substantially lower prices. It is essentially a 503(b) compounding pharmacy, focused on drugs that appear on the Food and Drug Administration’s shortage list.
On February 15th, the company announced price drops on four medications.
There is no question that Mark Cuban’s venture will have an impact, but will it be as disruptive to the prescription drug market as some in the media project? Not initially. The company’s impact on the drug market as a whole will be limited by the number and type (generic) of drugs offered, as well as it being a cash-only system.
The company’s origins go back to 2018 when Dr. Alex Oshmyansky founded Osh Affordable Pharmaceuticals. Mark Cuban financially backedOshmyansky’s efforts, and more than a year ago the company was renamed.
The firm’s mission statement describes how it is dedicated to producing low-cost versions of high-cost generic drugs. Here, the stated goal is to be “radically transparent” in its price negotiations with drug companies.
Cuban’s firm lets all stakeholders know what it costs to manufacture, distribute, and market its drugs. According to the company website, there will be no hidden costs, no middlemen, and 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 firm says it will buy directly from third party suppliers or manufacture its own products and sell at a steep discount with a 15% mark-up, plus a $3 pharmacist fee.
Details are still scarce on where the company will initially source its medicines, but it is planning to complete the building of a new manufacturing site by the end of 2022.
While MCCPDC will have an impact, as currently constituted, it won’t be as disruptive to the prescription drug market as some in the media have forecast.
First, MCCPDC only applies to generics. While there are certainly issues with specialty generics pricing, these pale in comparison to the problems with branded pricing, whether in the form of high launch prices or annual increases in the list prices of certain existing brand-name drugs that exceed inflation.
Second, there are several limitations regarding the online pharmacy’s scope. As of now, the number of products offered – 100 – is comparatively small. More importantly, Cuban’s company does not accept prescription insurance. Obviously, for the uninsured this doesn’t matter, and having access to certain low-priced generics from Cuban’s company will be very helpful. Likewise, for the insured with high deductibles or other coverage gaps in insurance, MCCPDC will assist. But, beyond the deductible space, for most insured customers, MCCPDC is less appealing. Besides, insured consumers who make use of Cuban’s online pharmacy will not have their out-of-pocket costs count towards their insurance deductible or other coverage gaps. This will mean that for prescription drugs not available at Cuban’s online pharmacy – which is the vast majority of drugs – the consumer will have to spend money out of pocket on products the insurer covers before insurance kicks in.
In this vein, MCCPDC also doesn’t tackle the much larger problem of traditional pharmacy benefit manager (PBM) dominance. Three PBMs – CVS Caremark, Express Scripts, and Optum Rx – control over 80% of the market. MCCPDC is competing with retail pharmacies who will remain under the stranglehold, if you will, of the large PBMs. If a retail pharmacy were to turn down all of the insurance plans that they manage and become cash-only, they would lose practically all their business.
Transparency is the buzzword in healthcare. It’s easy to understand why. U.S. healthcare markets generally lack transparency. And, without it, the market cannot operate optimally. Billionaire Mark Cuban is to be commended for tackling the lack of transparency.
Moreover, by offering improved access to certain lifesaving drugs that patients depend on, MCCDPC is providing a valuable service. In a statement, Alex Oshmyansky said “it is imperative that we take action and help expand access to these medications for those who need them most.” Indeed, MCCPDC currently offers drugs to treat a variety of illnesses, including diabetes, cancer, asthma, and cardiovascular conditions.
But, limited offerings and being a cash-only business lessen the disruptive impact of Cuban’s innovative online pharmacy on the prescription drug market as a whole.