Opinion | Medicare could save $3 billion by buying drugs like Mark Cuban

The Mark Cuban Cost Plus Drugs Company, which launched online in January, promises lower prices and complete transparency about how those prices are set. This venture offers a welcome reprieve to some patients, but it does not address the root causes of high drug prices. For that, we need congressional action.

Cuban’s new company purchases hundreds of generic drugs from manufacturers and sells them online directly to consumers. Each generic drug is priced at a cost negotiated with the manufacturer plus a 15 percent markup, a $3 pharmacy dispensing fee and $5 for shipping. Remarkably, this sometimes adds up to substantially lower prices for many patients.

In a recent study published in the Annals of Internal Medicine, we analyzed 89 generic drugs sold by Cost Plus Drugs and found that Medicare could have saved more than $3 billion in 2020 by purchasing 77 of them at Cost Plus Drugs prices. For example, Medicare paid more than $2 per pill for aripiprazole, a commonly used psychiatric medication, while Cuban’s company sells the same formulation of the drug for $0.24 per pill. At those prices, the government could have saved $233 million in 2020 on just this one drug.

So where do these savings come from?

By directly purchasing and selling drugs, the company eliminates insurance companies, pharmacy benefit managers, wholesalers and in-store pharmacies. These multiple middlemen play important roles in the supply chain but in some cases can introduce inefficiencies that lead to higher prices for patients. This is particularly problematic for uninsured patients or those with high-deductible health plans.

To be clear, Cuban’s company is not the first direct-to-consumer firm to sell generics. Walmart, Costco and several other retailers also sell low-cost generic medicines. Additionally, GoodRx offers free coupons for hundreds of generic drugs that can be used at pharmacies across the country.

Beyond offering savings for some patients, Cost Plus Drugs’s transparent pricing begins to lift the veil on drug prices, which have been shrouded in secrecy. Understanding the true cost of production and distribution can help us to understand when and why Medicare is overpaying for generics.

But Cuban’s approach has limitations. Patients must pay the full cost out of pocket, and those dollars do not count toward their insurance deductibles. Shopping around to find the lowest price for each generic is cumbersome…