Purchasing from Mark Cuban Pharmacy could save Medicare billions, study says

The Medicare prescription drug program could save billions of dollars a year if it bought generic drugs for acid reflux, cancer and other drugs from a new pharmacy backed by investor Mark Cuban, according to researchers at Harvard Medical School.

Cuban, the billionaire Internet businessman and owner of the NBA Dallas Mavericks, opened his pharmacy in January with the goal of disrupting the $ 365 billion prescription drug market by bypassing common health care providers and health care providers. consumers with a transparent fixed rate labeling pricing model.

A team of Harvard Medical School researchers says Mr Cuban’s cost-plus business model could also benefit health insurers, including Medicare, which spent about $ 115.6 billion on prescription drugs last year, or almost one-third of total US drug spending.

The taxpayer-funded health insurance program for seniors could have saved up to $ 3.6 billion over the course of a year if he had used Mr. Kuban’s pharmacy to buy generic drugs directly instead of the vast network of private insurance plans and according to the paper published in the Annals of Internal Medicine on Monday.

Medicare’s drug program, called Part D, was created in 2003 and prohibits the government from buying drugs directly. In contrast, private health insurance companies offer hundreds of different coverage plans across the country that are supposed to compete for patients by offering the lowest possible drug costs.

“It’s clear that Medicare is overpaying for some generic drugs and could save billions,” said study lead author Hussain Lalani, a primary care physician at Brigham and Women’s Hospital in Boston. “There are some serious shortcomings in the pharmaceutical supply chain.”

The analysis highlights the inefficiency in the market for prescription drugs that can lead to higher costs for consumers and payers, said Stacie B. Dusetzina, an associate professor of health policy at Vanderbilt University Medical Center who did not attend drug prices. research paper.

“We see that Medicare pays too much because of the complexity of the multi-factor supply chain,” he said. Dusetzina. “We created this behemoth system, and this alternative shows that if you remove as many of these factors as possible in the supply chain, you can reduce prices and make a profit.”

However, the paper points out a possible path to limiting Medicare spending, but does not address the most costly and difficult target of patented brand-name drugs.

In 2020, generics accounted for 88% of Medicare prescriptions but only 19% of spending, according to a recent report by the board of directors overseeing Medicare ‘s financial operations.

Harvard researchers analyzed prices for 89 generic drugs available at Mark Cuban Cost Plus Drug Company PBC in February purchased by Medicare. Medicare paid about $ 9.6 billion for drugs in 2020, or about a quarter of generic drug spending that year.

Among the drugs were the general versions of Gleevec cancer treatment, the Crestor cholesterol statin and the antipsychotic Abilify. The Cuban pharmacy has since expanded its offerings to include more than 300 generics.

Generic drugs are copies of branded drugs that can be manufactured and sold by any pharmaceutical company after the original product has lost its patent protection. For many drugs, the prices of generic drugs tend to be 50% to 95% cheaper than their respective brands.

The biggest savings from using the Cuban pharmacy came when they bought prescriptions in larger quantities, such as 90-day supplies, which reduced distribution fees, the authors said.

If Medicare bought the smallest available quantities at the Cuban pharmacy, the annual savings would be $ 1.7 billion.

The price that Medicare pays for a 90-day supply of esomeprazole, the acid reflux treatment known as Nexium, is $ 160, nine times the $ 17 that the insurance program would have paid if it had been purchased from a Cuban pharmacy. estimated by the researchers.

Purchasing the generic 90-day supply will save Medicare $ 293 million this year, the researchers estimated.

More than 400,000 people have created accounts at Cuban Cost Plus Pharmacy, and about half of them have purchased prescriptions through the company’s online mail order pharmacy, CEO and founder Alex Oshmyansky said in an interview.

The Cuban pharmacy did not fund or otherwise participate in the research report, said Dr. Lalani and Oshmyansky. Dr. Lalani and his co-authors, Aaron Kesselheim and Benjamin Rome, are members of the Brigham and Harvard Medical School Program in Regulation, Treatment, and Law, where they study drug pricing. The project is funded by Arnold Ventures, a charity that has funded research into high drug prices.

The pharmacy of Mr. Cuban buys generic drugs directly from manufacturers, including Amneal Pharmaceuticals Inc.

and resells them to patients on the Internet after receiving a 15% surcharge on their acquisition costs, plus a $ 3 fee for working in a pharmacy and a shipping fee of $ 5.

Write to Joseph Walker at joseph.walker@wsj.com

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