When billionaire Mark Cuban announced an attack on the pharmaceutical industry and high-priced drugs in January 2021, he was greeted with cheers.
His new company — Mark Cuban Cost Plus Drug Co., known as Cost Plus Drugs — has “the lowest prices on drugs anywhere,” he said.
The serial entrepreneur and owner of the NBA’s Dallas Mavericks evangelized in the media, getting press through The Wall Street Journal, Time, “The Daily Show,” and many other outlets. He gave colorful quotes along the way, at one point stating his goal was to “Just make the pharmaceutical industry so bad it bleeds.”
his new company, which is now offers more than a thousand generic drugsIt has social media influencers singing its praises: Reality star Kim Kardashian both tweeted and Instagrammed kudos. Former basketball player and Twitter personality Rex Chapman said Cuban there “Changing the prescription drug pricing game in America.”
Even the swinger forum on Reddit found a lot to like about the company’s low prices for Viagra and other drugs.
But beneath the hype lies a grim reality: In many cases, the price quotes patients see on websites are higher than what they get at their local pharmacy. This has to do with the segment that Cuba plays – general medicine – but also with the layers of complexity that are typical of the American healthcare system.
Today, his company mainly sells generic drugs, drugs that are no longer protected by patents that can guarantee monopoly profits for big pharmaceutical companies. In most cases, this is the cheapest part of the pharmaceutical economy.
To examine a large slice of Cuban merchandise, KHN looked at all the drugs and products offered on the site starting with the letter “A”, with each combination of strength, quantity, or amount, and type of drug (for example, capsules, tablets, or chewable gummies) available. It’s a pretty big example: At the beginning of February, there were 211 combinations.
KHN compares the price for each drug variety with prices from other pharmacies for the same drug, as compiled by the comparison shopping discount site GoodRx. Focusing on the Washington, DC area, where KHN is based, the publication found lower prices in at least one pharmacy on GoodRx—which did not include the Cuban company in its comparison—in 141 cases.
In the other 70 cases, the Cuban operation had a lower price or was simply outbid by a one-time bid. If there are savings, they can be substantial. A Washingtonian taking aprepitant, an anti-nausea drug, could save hundreds of dollars using a Cuban site.
The analysis is not comprehensive, as Cuban indicated to KHN via email. In part, this is due to the company’s pricing model: a markup of 15% of the manufacturer’s cost, plus $3 for labor per drug and $5 for shipping per order.
Many generics are so cheap that the $5 shipping fee will swallow up any small savings. However, Cuban noted, bundling multiple drugs—all with a $5 shipping fee—might be cheaper overall.
Other areas of the country may have lower prices. When given KHN’s analysis, the cost comparison of Cuba’s thinking may be better elsewhere. “Maybe in DC, they offer a Happy Hour special :),” he wrote, with a picture comparing the site’s prices for 10 and 40 milligram doses of atorvastatin, a popular cholesterol medication, with the cost of a CVS in Dallas. (But a search in Dallas didn’t show any better results: There was at least one online or brick-and-mortar option for every dose and quantity at a lower price than the Cuban company.)
So why shouldn’t prices be lower on Cuban sites than elsewhere? It is due to the peculiarities of the health sector. When his Twitter bio states he’s “dunking in the pharmaceutical industry,” that means Cuba isn’t what most people think.
“I see our competition as not being a real generic pharmaceutical manufacturer,” said Cost Plus Drugs co-founder Dr. Alex Oshmyansky on the podcast about pharmacy from March 2021.
Indeed, Oshmyansky said, they compete with pharmacy benefit managers and wholesalers.
So, Cuba’s bet so far, it’s cheaper that drug manufacturers increase costs than the companies in between – PBMs, wholesalers, and pharmacies.
And that bet is less likely to pay off for Cubans. Here’s why: PBMs negotiate costs through drug dealers for clients—insurers and employers. They try to get the total number of drugs per member of each plan. Optimizing the cost of each drug for each patient is not always the goal.
So PBMs receive rebates from pharmaceutical companies and use other strategies that reduce spending (in theory) without having to lower individual drug prices. Pharmacies, in turn, contract with various PBMs.
The prices offered by PBM can vary – daily, sometimes. That’s why organizations like GoodRx (which aggregate prices across multiple stores) and some independent pharmacies (which can acquire drugs from wholesalers looking for higher volumes) opportunistically can offer better prices for select generic drugs. It is also difficult to reduce the total cost of medicine.
Other large companies are trying other cost-cutting strategies. Amazon, for example, has launched a subscription service for Prime members that provides unlimited access to 53 generic drugs. There is a large overlap between the Amazon and Cuban listings. If Amazon’s influence worries Cubans, he’s not saying. “I’m not going to talk on the record about my competitors,” he told KHN.
Most large retailers — like Walmart — offer low, fixed prices on many generic drugs. There are also startups, like Renee mentioned, that offer subscription services for generics.
Cuban companies occupy an unusual niche in the market. It’s not a pharmacy — it relies on Truepill, a digital mail-order company, for its services. It’s also not a PBM—although it has partnered with a few.
Cost Plus Drugs has begun the process of building its own factory for generic drugs, but now critics wonder if it is really changing the supply chain. “They haven’t completed their mission to eliminate the middleman because they haven’t created anything and they don’t operate their own pharmacy, that is, they are just a middleman,” said Kyle McCormick, who runs an independent pharmacy that also offers cash prices based on the same markup on drug costs.
“It’s frustrating that they claim to be innovating when everything they’re doing now is better than the incumbent,” he said.
Cuban often undercuts its competitors, GoodRx CEO Doug Hirsch said. “He’s a TV personality and he’s doing a great job of dealing with the anger that consumers have,” he said, before admitting that he’s glad Cuba is on the market.
Indeed, the media blitz is a critical ingredient in the company’s success so far. Cuban said his company spends no money on marketing. Some credit the size of his Twitter account (nearly 9 million accounts) or his ability to get news coverage. Cuba credits word-of-mouth.
Although patient comments on social media are generally favorable, there are exceptions—and open ones. Elisabeth Bitros, a Generation X nursing assistant from New Jersey, said she switched her antidepressants to Cost Plus Drugs after her brick-and-mortar pharmacy tried to charge her hundreds of dollars. But Cuban companies aren’t perfect either, he said. A glitch delayed refills for her antidepressants around the 2022 holiday season.
“This drug, you start to withdraw if you miss a dose,” he said. “I don’t want to go through the holidays backwards!” But getting customer service from Cost Plus Drugs is a challenge: It’s hard to get a hold of someone over the phone. “Everything is done electronically,” he said. After a few days of tagging services with her doctor, she returned to CVS.
Cuba refused to comment on the specific case of Bitros on the record, but wrote: “We try to be very transparent about the fact that we have operators available and we always look for exceptions that require personal attention and increased support, we will not be the source of the fastest touch or the highest.
Kuba concluded: “It’s just a fact that it’s a cheap provider.”