Can Mark Cuban, a billionaire, fix America’s health system?

The price of a decades-old drug used to treat malaria and Aids complications was raised from $13.50 (£10.35) per pill to $750 per pill in August 2015.Shkreli, who was later imprisoned for seven years for an unrelated fraud scheme, became one of America’s most despised figures, demonized by both Hillary Clinton and Donald Trump, and dubbed the “Pharma Bro” by outraged people worldwide.

Patients died because they couldn’t afford a hypertension drug that cost thousands of dollars for a month’s supply, although the drug’s patent had expired decades earlier.

“Martin Shkreli was the straw that broke the camel’s back,” Dr. Oshmyansky tells The Independent. “I said on Facebook to some friends, ‘Let’s start a non-profit pharmaceutical company that’ll just make drugs and sell them at cost!'”

“Mark Cuban (estimated net worth: $4.7bn) has declared it his mission to smash open the US drug industry and cut the price of crucial medications,” according to a statement from Dr. Oshmyansky’s charity.

On CNN earlier this month, Mr. Cuban stated, “The goal is to be the low-cost provider for all drugs.” “This is the industry where people say “we need cheaper prices” every minute of the day. We’ll just have one mission. We won’t be adding frills.”

“Just f*** up the pharmaceutical sector so terrible that they bleed,” he stated when asked about his next life ambition.

The anti-parasite medicine albendazole, was reduced from $438 to $33 each dose, leukemia “wonder treatment” imatinib (the generic variant of Gleevec), was reduced from $9,657 to $47.10 per month’s supply of 400mg pills, and the muscle relaxer cyclobenzaprine, reduced from $1,094 to $53.10.

It’s one of the numerous startups, like Amazon’s new pharmacy business, trying to cut through the maze of intermediaries and agents that have kept American drug expenditure far and away from the world’s highest.

But how can pricing be so low? And can they outlast the big boys long enough to effect real change?

The world’s priciest medication market

Alec Smith, 26, died of diabetic complications alone on his Minnesota bedroom floor. He was born without the ability to naturally manufacture insulin, which is required by the body, yet a month’s supply of exogenous insulin cost him $1,30

Since Mr. Smith died in 2017, diabetic activists have used his name to accuse Big Pharma of benefiting from sky-high insulin pricing. The cost of many life-saving drugs is also prohibitive.

According to Vox, the US accounts for between 64 and 78% of global drug profits. Americans pay about 3.5 times more per dose of medication, both copyrighted pharmaceuticals and “generic” drugs whose patents have expired, but health insurance bear some of the expense.

The positive is that more money goes into new cure research in the USA, and patients get new treatments sooner. For people without insurance or whose insurance company refuses to cover their prescription, this is cold comfort.

A former drug researcher and pharmacy consultant, Bonnie Kirschenbaum says there are no pricing limits on prescription drugs in the US. “Brand-name medications with patent protection are significantly more expensive in the US than abroad…

“Once the patent expires and generics are permitted, the price may reduce by up to 90% compared to the brand. However, many patients are still forced to use the brand for various reasons “It “may be excessive” for patients to bear most insurance costs.

Recently, numerous firms have indicated efforts to contest this. To do so, Amazon acquired the online pharmacy PillPack for $753 million in 2018. The announcement sent shares of drugstore chains tumbling.

In addition, the company has been able to reduce costs by a large margin. A month’s supply of 400mg imatinib costs $147.20, whereas albendazole costs $92.72. Unlike Cost Plus, it sells insulin and offers large discounts on brand-name medications, as well as many generics.

GoodRx, created in 2011, is a price comparison service that offers consumers coupons and savings for generic and brand-name pharmaceuticals. Many prescription companies, insurers, pharmacies, and doctors offer such coupons, but they can be hard to find.

For example, House Rx just secured $25 million from investors to confront leading drug market intermediaries, while Civica is doing the same for hospital medications.

According to Ms. Kirschenbaum, disruptor newcomers seek the simplest, most cost-effective business strategy that immediately impacts patient drug prices. “They have created innovative processes of acquiring or manufacturing and dispensing [prescription] medications that are neither impeded and limited by sole source brand patents.”

Middlemen ‘inflate drug prices’

Dr. Oshmyansky’s first hypothesis was that cheaper drug manufacture was the answer. He had a dual Ph.D. in medicine and mathematics (in another universe, he may have been a super physicist) and had gone to law school for a year out of curiosity.

But the issue was with a pharmaceutical benefits manager, or PBM, a resident of the US healthcare swamp. Insurance companies use these organizations to negotiate with medication makers and pharmacies, putting together a “formulary” of drugs that insurers will pay.

Theoretically, this should lead to cheaper expenses, and it does. Insurers pay much less than the “list price” because PBMs negotiate significant rebates that medication producers give back to buyers.

PBMs get a cut of the refund, thus they have an incentive to negotiate big rebates. The US Senate study on insulin costs in 2021 claims they did so by raising list prices, allowing them to claim larger rebates and hence bigger savings.

A higher list price improves the dollar worth of rebates, discounts, and other payments that a manufacturer can offer to a PBM and health plans. “Concerns about PBMs and health plans retaliating against insulin producers prevented them from setting lower list pricing for their medications, lowering patient out-of-pocket payments. …

“PBMs appeared to be complicit. There seems to be little or no effort to dissuade manufacturers from raising their list prices. As a result, the Committee found that PBMs used their size and aggressive negotiation tactics, such as threatening to exclude drugs from formularies, to extract more generous rebates.”

According to the Drug Channels Institute, only three PBMs – CVS Caremark, Cigna, and UnitedHealth – control 80% of the market. As a result, they can demand that their drugs be included in insurers’ formularies.

“They have a stranglehold on our members’ business practices,” says Ronna Hauser, senior vice president of policy at the National Community Pharmacists’ Association (NCPA).

“They regulate which patients can visit our members’ pharmacies, whose prescriptions they can fill, how much they pay, and how much our members are reimbursed to fill those prescriptions…

« It hurts our members when they’re forced to prescribe a more expensive prescription when an expensive generic is available because they’ve negotiated a better rebate from a drug company.

Patients don’t see the rebates since their copays are based on the list price, not the actual price. In 2013, 23% of medications bought at pharmacies had a copay higher than their insurer’s payment.

Mark Cuban’s cold email

Politicians and regulators in the US have taken note. PBMs were slammed in recent evidence by the Federal Trade Commission (FTC), one of the USA’s two national competition regulators.

“Break them!” declared APhA CEO Scott Knoer. A recent report from the Community Oncology Alliance describes PBMs as “an oligopoly of affluent corporations that frequently prey on healthcare practices, doctors, and their patients.”

The American Pharmacy Cooperative stated PBMs “take a sledgehammer to patients, patient access to care, and competition” and accused them of “inflating prescription prices and clawing that money back to enrich their pockets.”

In February, the FTC’s governing panel divided 2-2 along party lines, halting an investigation into PBMs. The Senate has yet to confirm President Joe Biden’s nominee for a fifth swing vote.

Cost Plus wants to help here. According to Dr. Oshmyansky, PBMs play games to extract as much money from the pharmaceutical supply chain as possible. “The number of games and graft has exploded in the last thirty years, so we can make significant changes just by removing such businesses from the supply chain.”

Cost Plus prices all pharmaceuticals using a simple method found on its website. It charges the manufacturer’s cost plus a 15% profit margin, $3 for pharmacy labor, shipping, and taxes. It doesn’t function with insurers yet, so you have to pay cash. The deductible or copay may save money for insured patients.

This strategy wouldn’t work outside the USA, where PBMs aren’t as prevalent. Dr. Oshmyansky says that by avoiding PBM fees, pharmaceutical companies can make more money selling through Cost Plus.

But when Dr. Oshmyansky established Cost Plus as a non-profit in 2015, his early fundraising efforts “failed catastrophically.” Says he “I spent about three and a half years trying to get funds to get it started… I didn’t raise a dollar beyond my investment.”

When he applied to the famous Silicon Valley startup accelerator YCombinator in 2018, they suggested he reincorporate the non-profit as a PBC (PBC). Unlike conventional corporations, PBCs are required to meet additional goals set by the government. For Cost Plus, that means “ensuring low-income individuals and communities have access to cheap health-related products.”

An email led to Mark Cuban’s door. Dr. Oshmyansky knew the Dallas Mavericks owner reads strangers’ emails and pitched him “on a whim”. Mr. Cuban liked the idea and bought a majority stake in the company.

In the day-to-day business, he is actively involved. “People normally assume I’m exaggerating, but I’m not. He provided a pharma business a tour of the Dallas Mavericks practice facility to help close the sale.”

‘We must create a parallel supply chain.’

PBMs refute Dr. Oshmyansky’s story. A trade body, the Pharmaceutical Care Management Association (PCMA), says PBMs have a track record of lowering prescription drug costs for customers and consumers. “Accusations that PBMs increase drug costs are demonstrably untrue and unsupported by the facts.

He cites a US Government Accountability Office (GAO) report that indicated PBMs lowered prescription drug spending by the taxpayer-funded Medicare program by 20%.

He adds that clients chose PBMs through a competitive process, allowing the best offer to win and that while insurers and other clients can refuse to engage with PBMs, they do so to save money.

Cigna declined to comment, while CVS and UnitedHealth sent questions to the PCMA.

Dr. Oshmyansky expects resistance. The PBMs’ control over insurers could have prevented Cost Plus from entering the market by refusing to place its goods on formularies, he claims. “Good business practice is to specialize, but we don’t have that luxury,” he argues. “We need to own a full parallel supply chain to ensure that the drug gets to the patient.”

That’s why the company is developing its medication manufacturing factory in Texas, which the FDA expects to be done this summer. It will make medicines in short supply, like child chemotherapy drugs (thanks to a small market, says Dr. Oshmyansky).

The practice has constraints. Neither insulin (which must be refrigerated during transit) nor banned medicines like Adderall (a stimulant used to treat ADHD) are now available through Cost Plus, though Dr. Oshmyansky hopes to change that.

It is clear what they can and cannot give, says Ms. Kirschenbaum. “Controlled substances (narcotics) are governed by both federal and state laws. Liquids and refrigerated medications are difficult to handle during delivery. No brand name drugs included.”

Cost Plus does not yet accept insurance, but it is in talks with insurers, particularly those who could include Cost Plus in employee health plans. However, some of its discounts are equivalent to current programs like GoodRX or drugstore membership programs.

The NCPA opposes Mr. Cuban’s sole mail-order focus, which excludes member pharmacists (though again, Dr. Oshmyansky says it hopes to work with local pharmacists in the future). Patients lose face-to-face contact with their valued healthcare practitioner, adds Ms. Hauser. The value of pharmacist services like Covid testing and immunizations is clear.

Then she adds: “We’d gladly compete with Mark Cuban’s concept… our members are highly enterprising. They can’t compete with the PBMs’ stranglehold on their business model.”

As long as they aren’t part of conglomerates that also run PBMs, Dr. Oshmyansky believes insurers, medication makers, and pharmacists can all benefit from dropping PBMs.

“The pharmaceutical industry is so involved in the ecosystem that going against it is risky,” he argues. “I believe there will be a shift away from that. The business case for change is no longer debatable.”

The price of a decades-old medicine used to treat malaria and Aids complications was boosted from $13.50 (£10.35) per pill to $750 per pill in August 2015.

Shkreli, who was eventually imprisoned for seven years for an unrelated fraud scheme, became one of America’s most despised figures, demonized by both Hillary Clinton and Donald Trump, and dubbed the “Pharma Bro” by enraged people worldwide

Patients died because they couldn’t afford a hypertension treatment that cost thousands of dollars for a month’s supply, although the drug’s patent had expired decades before.

“Martin Shkreli was the straw that broke the camel’s back,” Dr. Oshmyansky tells The Independent. “I said on Facebook to several friends, ‘Let’s form a non-profit pharmaceutical company that’ll merely develop pharmaceuticals and sell them at cost!'”

“Mark Cuban (estimated net worth: $4.7bn) has made it his goal to bust up the US drug industry and lower the price of vital medications,” according to a statement from Dr. Oshmyansky’s foundation.

On CNN earlier this month, Mr. Cuban stated, “The goal is to be the low-cost provider for all pharmaceuticals.” “This is the industry where people say “we need cheaper prices” every minute of the day. We’ll just have one mission. We won’t be adding frills.”

“Just f*** up the pharmaceutical sector so terrible that they bleed,” he stated when asked about his next life ambition.

The anti-parasite medicine albendazole was reduced from $438 to $33 each dose, leukemia “wonder treatment” imatinib (the generic variant of Gleevec), was reduced from $9,657 to $47.10 per month’s supply of 400mg pills, and the muscle relaxer cyclobenzaprine, reduced from $1,094 to $53.10.

It’s one of the numerous startups, like Amazon’s new pharmacy business, trying to cut through the maze of intermediaries and agents that have kept American drug expenditure far and away from the world’s highest.

But how can pricing be so low? And can they outlast the big boys long enough to effect real change?

The world’s priciest medication market

Alec Smith, 26, died of diabetic complications alone on his Minnesota bedroom floor. He was born without the ability to naturally manufacture insulin, which is required by the body, yet a month’s supply of exogenous insulin cost him $1,3

Since Mr. Smith died in 2017, diabetic activists have used his name to accuse Big Pharma of benefiting from sky-high insulin pricing. The cost of many life-saving drugs is also prohibitive.

According to Vox, the US accounts for between 64 and 78% of global drug profits. Americans pay about 3.5 times more per dose of medication, both copyrighted pharmaceuticals and “generic” drugs whose patents have expired, but health insurance bear some of the expense.

The positive is that more money goes into new cure research in the USA, and patients get new treatments sooner. For people without insurance or whose insurance company refuses to cover their prescription, this is cold comfort

A former drug researcher and pharmacy consultant, Bonnie Kirschenbaum says there are no pricing limits on prescription drugs in the US. “Brand-name medications with patent protection are significantly more expensive in the US than abroad…

“Once the patent expires and generics are permitted, the price may reduce by up to 90% compared to the brand. However, many patients are still forced to use the brand for various reasons “It “may be excessive” for patients to bear most insurance costs.

Recently, numerous firms have indicated efforts to contest this. To do so, Amazon acquired the online pharmacy PillPack for $753 million in 2018. The announcement sent shares of drugstore chains tumbling.

In addition, the company has been able to reduce costs by a large margin. A month’s supply of 400mg imatinib costs $147.20, whereas albendazole costs $92.72. Unlike Cost Plus, it sells insulin and offers large discounts on brand-name medications, as well as many generics.

GoodRx, created in 2011, is a price comparison service that offers consumers coupons and savings for generic and brand-name pharmaceuticals. Many prescription companies, insurers, pharmacies, and doctors offer such coupons, but they can be hard to find.

For example, House Rx just secured $25 million from investors to confront leading drug market intermediaries, while Civica is doing the same for hospital medications.

According to Ms. Kirschenbaum, disruptor newcomers seek the simplest, most cost-effective business strategy that immediately impacts patient drug prices. “They have created innovative processes of acquiring or manufacturing and dispensing [prescription] medications that are neither impeded and limited by sole source brand patents.”

Middlemen ‘inflate drug prices’

Dr. Oshmyansky’s first hypothesis was that cheaper drug manufacture was the answer. He had a dual Ph.D. in medicine and mathematics (in another universe, he may have been a super physicist) and had gone to law school for a year out of curiosity.

But the issue was with a pharmaceutical benefits manager, or PBM, a resident of the US healthcare swamp. Insurance companies use these organizations to negotiate with medication makers and pharmacies, putting together a “formulary” of drugs that insurers will pay.

Theoretically, this should lead to cheaper expenses, and it does. Insurers pay much less than the “list price” because PBMs negotiate significant rebates that medication producers give back to buyers.

PBMs get a cut of the refund, thus they have an incentive to negotiate big rebates. The US Senate study on insulin costs in 2021 claims they did so by raising list prices, allowing them to claim larger rebates and hence bigger savings.

A higher list price improves the dollar worth of rebates, discounts, and other payments that a manufacturer can offer to a PBM and health plans. “Concerns about PBMs and health plans retaliating against insulin producers prevented them from setting lower list pricing for their medications, lowering patient out-of-pocket payments. …

“PBMs appeared to be complicit. There seems to be little or no effort to dissuade manufacturers from raising their list prices. As a result, the Committee concluded that PBMs utilized their size and aggressive negotiation techniques, such as threatening to exclude medications from formularies, to collect more generous rebates.”

According to the Drug Channels Institute, only three PBMs – CVS Caremark, Cigna, and UnitedHealth – control 80% of the market. As a result, they can demand that their drugs be included in insurers’ formularies.

“They have a stranglehold on our members’ business practices,” says Ronna Hauser, senior vice president of policy at the National Community Pharmacists’ Association (NCPA).

“They regulate which patients can visit our members’ pharmacies, whose prescriptions they can fill, how much they pay, and how much our members are reimbursed to fill those prescriptions…

« It hurts our members when they’re forced to prescribe a more expensive prescription when an expensive generic is available because they’ve negotiated a better rebate from a drug company.

Patients don’t see the rebates since their copays are based on the list price, not the actual price. In 2013, 23% of medications bought at pharmacies had a copay higher than their insurer’s payment.

Mark Cuban’s cold email

Politicians and regulators in the US have taken note. PBMs were slammed in recent evidence by the Federal Trade Commission (FTC), one of the USA’s two national competition regulators.

“Break them!” declared APhA CEO Scott Knoer. A recent report from the Community Oncology Alliance describes PBMs as “an oligopoly of affluent corporations that frequently prey on healthcare practices, doctors, and their patients.”

The American Pharmacy Cooperative stated PBMs “take a sledgehammer to patients, patient access to care, and competition” and accused them of “inflating prescription prices and clawing that money back to enrich their pockets.”

In February, the FTC’s governing panel divided 2-2 along party lines, halting an investigation into PBMs. The Senate has yet to confirm President Joe Biden’s nominee for a fifth swing vote.

Cost Plus wants to help here. According to Dr. Oshmyansky, PBMs play games to extract as much money from the pharmaceutical supply chain as possible. “The number of games and graft has exploded in the last thirty years, so we can make significant changes just by removing such businesses from the supply chain.”

Cost Plus prices all pharmaceuticals using a simple method found on its website. It charges the manufacturer’s cost plus a 15% profit margin, $3 for pharmacy labor, shipping, and taxes. It doesn’t function with insurers yet, so you have to pay cash. The deductible or copay may save money for insured patients.

This strategy wouldn’t work outside the USA, where PBMs aren’t as prevalent. Dr. Oshmyansky says that by avoiding PBM fees, pharmaceutical companies can make more money selling through Cost Plus.

But when Dr. Oshmyansky established Cost Plus as a non-profit in 2015, his early fundraising efforts “failed catastrophically.” Says he “I spent about three and a half years trying to get funds to get it started… I didn’t raise a dollar beyond my investment.”

When he applied to the famous Silicon Valley startup accelerator YCombinator in 2018, they suggested he reincorporate the non-profit as a PBC (PBC). Unlike conventional corporations, PBCs are required to meet additional goals set by the government. For Cost Plus, that means “ensuring low-income individuals and communities have access to cheap health-related products.”

An email led to Mark Cuban’s door. Dr. Oshmyansky knew the Dallas Mavericks owner reads strangers’ emails and pitched him “on a whim”. Mr. Cuban liked the idea and bought a majority stake in the company.

In the day-to-day business, he is actively involved. “People normally assume I’m exaggerating, but I’m not. He provided a pharma business a tour of the Dallas Mavericks practice facility to help close the sale.”

‘We must create a parallel supply chain.’

PBMs refute Dr. Oshmyansky’s story. A trade body, the Pharmaceutical Care Management Association (PCMA), says PBMs have a track record of lowering prescription drug costs for customers and consumers. “Accusations that PBMs increase drug costs are demonstrably untrue and unsupported by the facts.

He cites a US Government Accountability Office (GAO) report that indicated PBMs lowered prescription drug spending by the taxpayer-funded Medicare program by 20%.

He adds that clients chose PBMs through a competitive process, allowing the best offer to win and that while insurers and other clients can refuse to engage with PBMs, they do so to save money.

Cigna declined to comment, while CVS and UnitedHealth sent questions to the PCMA.

Dr. Oshmyansky expects resistance. The PBMs’ control over insurers could have prevented Cost Plus from entering the market by refusing to place its goods on formularies, he claims. “Good business practice is to specialize, but we don’t have that luxury,” he argues. “We need to own a full parallel supply chain to ensure that the drug gets to the patient.”

That’s why the company is developing its medication manufacturing factory in Texas, which the FDA expects to be done this summer. It will make medicines in short supply, like child chemotherapy drugs (thanks to a small market, says Dr. Oshmyansky).

The practice has constraints. Neither insulin (which must be refrigerated during transit) nor banned medicines like Adderall (a stimulant used to treat ADHD) are now available through Cost Plus, though Dr. Oshmyansky hopes to change that.

It is clear what they can and cannot give, says Ms. Kirschenbaum. “Controlled substances (narcotics) are governed by both federal and state laws. Liquids and refrigerated medications are difficult to handle during delivery. No brand name medications included.”

Cost Plus does not yet accept insurance, but it is in talks with insurers, particularly those who could include Cost Plus in employee health plans. However, some of its discounts are equivalent to current programs like GoodRX or drugstore membership programs.

The NCPA opposes Mr. Cuban’s sole mail-order focus, which excludes member pharmacists (though again, Dr. Oshmyansky says it hopes to work with local pharmacists in the future). Patients lose face-to-face contact with their valued healthcare practitioner, adds Ms. Hauser. The value of pharmacist services like Covid testing and immunizations is clear.

Then she adds: “We’d gladly compete with Mark Cuban’s concept… our members are highly enterprising. They can’t compete with the PBMs’ stranglehold on their business model.”

As long as they aren’t part of conglomerates that also run PBMs, Dr. Oshmyansky believes insurers, medication makers, and pharmacists can all benefit from dropping PBMs.

“The pharmaceutical industry is so involved in the ecosystem that going against it is risky,” he argues. “I believe there will be a shift away from that. The business case for change is no longer debatable.”