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Entrepreneur beats prices of supply chain wholesalers, PBMs, pharmacies, and insurers.
The findings “suggest that Medicare is overpaying for many generic drugs,” said the study, “Potential Medicare Part D Savings on Generic Drugs From the Mark Cuban Cost Plus Drug Company,” or MCCPDC, published June 21 in the Annals of Internal Medicine, a journal of the American College of Physicians.
The study suggested policy reforms that could make generic drugs more affordable.
“Although direct-to-consumer private companies like MCCPDC may offer savings for some patients on select drugs, policy reforms that improve price transparency, increase competition for high-cost generic drugs, prevent annual price increases, and limit pharmacy and distribution costs could increase affordability of essential generic medicines for all Americans,” said the study, led by corresponding author Hussain S. Lalani, MD, MPH, of Brigham and Women’s Hospital and Harvard Medical School in Boston.
The results “highlight inefficiencies in the existing generic pharmaceutical distribution and reimbursement system, which includes wholesalers, pharmacy benefit managers, pharmacies, and insurers,” the study said.
The researchers cited a study that estimated the supply chain retains 64% of every dollar spent on generic drugs, compared with 25% of every dollar spend on brand-name drugs before rebates. Generic drugs have lower ingredient and manufacturing costs than brand-name drugs, so dispensing fees represent a greater share of the price.
The study noted MCCPDC sets prices at the cost of ingredients and manufacturing plus a 15% margin, a $3 dispensing fee, and a $5 shipping fee.
It did not mention the current economy with skyrocketiing drug and health care cost, patients' mountains of medical debt, or the business goals of Cuban, the outspoken owner of the Dallas Mavericks NBA team and cohost of the ABC television show “Shark Tank.”
Cuban and MCCPDC cofounder Alex Oshmyansky started the company in 2016 with a “pledge to provide radical transparency in how we price our drugs,” according to its website.
“Our goal is that everyone should be able to afford their medicine. Everyone should know what it cost to make their medicine. Everyone should feel the price they paid for their medicine was fair,” the MCCPDC website said.
MCCPDC sells 109 generic medications. The study compared that company’s prices and Medicare Part D spent for 89 of those; it excluded 20 with multiple dosage forms, such as cream and ointment, because prices by ingredient were not comparable.
Researchers calculated prices in 2022 U.S. dollars, with use data based on 2020, the most recent Medicare data available.
Among the available savings for buying maximum quantities of drugs:
Savings were greater when purchasing drugs in larger quantities to minimize fees. Even buying the minimum quantities of drugs, Medicare would have saved $1.7 billion on 42 of the 89 drugs. In that scenario, shipping would have cost $872 million and pharmacy fees would have cost $523 million, making up a higher percentage of the total spending.
The study included a chart with the top 10 generic drugs with the highest estimated savings, with drug name and dosage form; Medicare Part D vs MCCPDC prices per 90 count; estimated Medicare Part D spending; and estimated MCCPDC savings:
Originally published on our sister brand, Medical Economics.