Disrupting the Pharmaceutical Industry, One Billionaire at a Time
I want to put you in a real scenario right now that Americans struggle to come to terms with.
You just found out you have gotten diagnosed with leukemia, a terrible cancer that takes the lives of countless people every year. However, today is not one of those days, for you beats the odds and have a fighting chance to continue living. After leaving the hospital and being confronted with a costly bill that insurance won’t fully cover, your doctor prescribes you Gleevec, a powerful leukemia pharmaceutical to continue taking in order to assist with your monitored recovery.
Most of your savings at this point are gone, the financial burden is looming over your head more and more as you are no longer able to financial contribute to the household due to bed rest and physical therapy. Eventually, your prescription arrives at your local pharmacy. Your jaw drops as you see the out-of-pocket cost for this life saving and necessary drug: $2,000. You think to yourself, “This must be some sort of mistake, surely, they added an extra zero to this…right?” You eventually ask the pharmacist about the price, who much to your dismay, confirms that the price is correct. Your heart sinks as the reality sets in that in order to continue living, in order to continue battling the odds, you have to shell out $2,000 for something you wish you could just forget about. While reluctantly handing over your credit card, you think to yourself, “If only there was a cheaper way.”
Enter Mark Cuban.
Mark Cuban, the Dallas Mavericks owner and tech entrepreneur, opened Cost Plus Drug Company after four years of development in January 2022 after an interesting cold email from co-founder Dr. Alex Oshmyansky stuck out to him. Dr. Oshmyansky proposed to Cuban an investment opportunity in his then company, Osh’s Affordable Pharmaceuticals, which offered exactly that: affordable, generic pharmaceuticals.
The company works under a cost-plus pricing model, where it marks each drug up by 15% and a flat $3 pharmacy fee where needed. By using this model, this keeps prices effectively lower than the traditional competition and eliminates the need for a third-party pharmacy benefit manager, who often times takes a cut from the manufacturers through rebates. Additionally, the model is cash only, so there are no involving insurances at all since more often than not, insurance wants their user to go through a specific path to get their medication. With America having the highest average pharmaceutical cost in the world, it comes as no surprise that Cuban wanted to change the paradigm involving medicines, as evident from his website where he states, “Everyone should have safe, affordable medicines with transparent prices.”
Cuban has plans for future expansion, as evident with a 22,000 square foot factory currently under construction in Dallas, with hopes of finishing this year so that more generic brand medicines can be developed, such as insulin where Cuban has seen a high demand. The end goal: give people affordable medicine and cause a disruptive change in the pharmaceutical world to the point where these big-name pharmacies lower their prices.
The days of coming to terms with expensive pharmacy bills may be ending thanks to one cold email and an entrepreneur that likes to challenge the status quo. With enough time, the seemingly impossible task to go head-to-head with big pharma will prevail for the average individual, providing necessary medication to those who depend on it, without costing a penny more than it should.
What are your thoughts? Do you believe the pharmacy competition is good for the world of medicine, or will it lead to more restrictions by the government regarding pricing to protect big pharma?