It’s every entrepreneur’s dream: You send Mark Cuban an email out of the blue, pitching an idea that could change an industry. Then he not only replies—he says yes, makes you CEO, and a factory is built to make it all happen.
It’s no dream. It’s actually happening to Alex Oshmyansky, a Dallas radiologist who had grown frustrated by the current system, where companies called pharmacy-benefit managers (PBMs) manage drug benefits for employers, health insurers, Medicare Part D prescription plans, and other payers.
The problem
As the middle man in a long line of insurers, drug companies, and pharmacy chains, PBMs are supposed to help keep drug costs down.
But according to watchdogs like the Commonwealth Fund, PBMs “may also have an incentive to favor high-priced drugs over drugs that are more cost-effective. Because they often receive rebates that are calculated as a percentage of the manufacturer’s list price, PBMs receive a larger rebate for expensive drugs than they do for ones that may provide better value at lower cost.”
According to the Commonwealth Fund, drug manufacturers say they’ve been forced to raise their prices because of the growing rebates they’ve paid PBMs. A recent analysis cited by the organization shows drug manufacturer rebates to PBMs increased from $39.7 billion in 2012 to $89.5 billion in 2016.
According to the Wall Street Journal, several state attorneys general are probing PBM pricing and rebate practices. And the federal government is reviewing a new Medicare rule that would require rebates negotiated by PBMs to go toward reducing patients’ costs.
Alex Oshmyansky, co-founder and CEO of Mark Cuban Cost Plus Drug Company [Photo: Vision Radiology]
Promising ‘radical transparency’
Dr, Oshmyansky sent his “cold email” to Mark Cuban about three years ago, and it got a hugely positive response from the Dallas Mavericks’ billionaire owner, the Wall Street Journal reports. Cuban told the WSJ that he agreed to fund the company after receiving the pitch—with the aim of selling generic drugs at a transparent, fixed-rate markup.
To make that happen, the new startup—the Mark Cuban Cost Plus Drug Company—will launch an online pharmacy that will sell 100 of the most-often prescribed generic prescription drugs.
The new company pledges to provide “radical transparency” in how it prices its low-cost versions of high-cost generic drugs.
“We will let everyone know what it costs to manufacture, distribute, and market our drugs to pharmacies,” the company says on its website. “We add a flat 15% margin to get our wholesale prices. This makes sure we remain viable and profitable. There are no hidden costs, no middlemen, no rebates only available to insurance companies. Everybody gets the same low price for every drug we make.”
Selling a $225 pill for only $20
The startup’s first product will be Albendazole, an antiparasitic drug with a current list price of around $225 per tablet. The Mark Cuban Cost Plus retail price? Only $20.
“At the Mark Cuban Cost Plus Drug Company, our cost to make and distribute the drug is approximately $13 per tablet,” the company says on its website. “We add a 15 percent profit margin and charge $15 per tablet as a wholesale price to pharmacies, clinics, hospitals, etc. We then set a manufacturer’s suggested retail price of $20 per tablet. If you have insurance, the price can go down to less than a dollar a tablet.”
‘We hate PBMs, so we made a better one’
“We hate PBMs, so we made a better one,” Cuban’s new company says on its LinkedIn page, promising “to help fundamentally change the way the pharma industry operates.”
Cuban’s company is withering in its criticism of traditional PBMs.
“We believe traditional pharmacy benefit managers are one of the biggest scams in the U.S. healthcare system,” the company adds on LinkedIn. “They do exactly what their name says they will do—they negotiate prices to the benefit of pharma.”
To proclaim its difference, Cuban’s company says the “P” in its PBM stands for “Patient.”
“Our only goal is to push down the pricing of drugs for every American,” the company pledges. “We exist to benefit all hard-working Americans who are tired of being tired worrying about their health care costs.”
Mark Cuban Cost Plus Drug Company Plant in Dallas’ Deep Ellum [Rendering: Jacobs]
Building an $11M pharmaceutical plant in Dallas’ Deep Ellum
Mark Cuban Cost Plus is building an $11 million, 22,000-square-foot plant in Dallas’ Deep Ellum neighborhood to manufacture a number of generic drugs, with plans to open in September 2022. Construction on the facility began in February with the remodeling and retrofitting of an existing building at 302 S. Walton St., the Dallas Morning News reported at the time.
Dallas-based Jacobs won the contract to provide engineering services for the plant construction. The facility will be registered with the Food and Drug Administration to allow ultimate flexibility for rapid response to drug shortages, Jacobs noted on its website. The plant will support the formulation, filling, and packaging of sterile medicines.
“The facility’s innovative design will allow for the production of small product batches considered in short supply by the FDA and those intended for treatment of rare diseases that typically affect a smaller population, known as orphan drugs,” Jacobs People & Places Solutions EVP Ken Gilmartin said in a statement.
New company will buy drugs direct from manufacturers
The pharmacy will buy drugs directly from generic drug manufacturers including Amneal Pharmaceuticals, charging customers a 15 percent markup plus a $3 dispensing fee, Oshmyansky told the WSJ.
The company will begin bidding for clients in 2022 and plans to be operational in 2023. he added, saying the company will share details of its operating costs to clients and will share 100% of the rebates they receive from drugmakers
With the factory up and running as soon as next fall, Cuban and Oshmyansky will be creating “an all-in-one pharmaceutical supplier, combining manufacturing, wholesale distribution, and pharmacy services under one roof,” the WSJ writes.
“The supply chain for distributing pharmaceuticals to patients is so cumbersome and broken,” Dr. Oshmyansky told the WSJ. “We decided the only way to get our drugs to the people who need them is to build a parallel supply chain where we have control of all the intermediary players and ensure the same level of transparency at every level.”
Mark Cuban Cost Plus PBM website
Mark Cuban Cost Plus PBM has launched a website to begin talks with companies who employ or manage the healthcare of “1 to 10,000+ employees.”
“We will show you all of our costs to prove to you what we are doing,” the company promises on the website. “We are here to make Patient Benefit Management a way to make as many medications as possible affordable to as many patients as possible.”
“We hope you will work with us to disrupt and disable big pharma,” the company adds.
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R E A D N E X T
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The Mark Cuban Cost Plus Drug Company aims to "disrupt and disable big pharma" by offering more than 100 generic drugs "at striking savings" direct to consumers on a cash-pay basis. As a pharmaceutical wholesaler, MCCPDC says it can "bypass middlemen and outrageous markups" by simply charging a flat 15% margin and pharmacist fee. With an $11M plant going up now in Deep Ellum, Cuban clearly means business.
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The $11 million, 22,000-square-foot facility is expected to produce low-cost generic versions of traditionally overpriced drugs—and aims to be a designated site for producing drugs which other companies see as unprofitable to make. Two weeks ago, the MCCPDC launched its online pharmacy, offering 100+ generic drugs at manufacturer cost plus a flat 15% margin and a $3 pharmacist fee.
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