What Mark Cuban Gets Wrong About Prescription Drugs
This op-ed is reprinted from STAT News, an online publication focusing on health, medicine, and scientific advancements with over 2 million monthly readers. Dr. Wenzell has previously written about Pharmacy Benefits Managers (PBMs) and how they negatively influence the pharmaceutical market, but solely blaming them overlooks the other underlying issues that lead to unclear and inflated prescription drug pricing. They are a symptom of an underlying disease, and focusing only on eliminating them is treating a fever and ignoring the infection. This op-ed explores Mark Cuban’s success with simplifying the prescription drug market due to his partnership with generic drug manufacturers, even while he is partnering with PBMs.
——-
Mark Cuban, the Dallas Mavericks owner and “Shark Tank” star, has been making headlines recently with his direct-to-consumer venture, Cost Plus Drugs. The company manufactures generic prescription drugs and boasts more than 2 million members. As a family medicine specialist who has firsthand experience with American households’ dissatisfaction with the state of the nation’s prescription drug marketplace, I believe the success of Cost Plus Drugs reveals an appetite for alternatives to the status quo in the pharmaceutical industry.
Cuban claims the reason behind the success of Cost Plus Drugs is the company’s decision to bypass pharmaceutical benefit managers (PBMs) — the negotiating agents insurance companies hire to negotiate big pharma’s prices down. But that might not be the case. Instead, its success appears to lie in its choice to collaborate with affordable generic drug manufacturers rather than the major pharmaceutical companies.
Last year, the Department of Health and Human Services found that, between July 2021 and July 2022, major pharma companies raised the list price on more than 1,200 drugs by an average of 31 percent. That’s 23 percent more than the country’s overall inflation rate during the same period. Meanwhile, generic drug companies saved the U.S. roughly $2.6 trillion from 2012 to 2021, according to the Association for Accessible Medicines, a trade group representing generic drug manufacturers.
Though a popular narrative casts PBMs as villains that pocket the cost-savings they secure from the drug manufacturers, this scapegoating only deflects attention from big pharma’s intricate web of entities that raise America’s drug costs.
Big pharma uses an array of tactics to keep generics out of the market and drive up prices, such as “evergreening” (extending patents that are about to expire) and the creation of “patent thickets” (layering multiple patents for drug manufacture and their applicators).
Granted, PBMs are not without faults. There’s evidence that they have engaged in problematic practices that inflate and obfuscate drug prices. High rebate reimbursements and conflicts of interest from being owned by the very companies they are supposed to negotiate with on behalf of patients are worth some criticism.
But their negotiating tactics often help in lowering big pharma’s drug prices. To wit, Mark Cuban has now even partnered with three PBMs that have upfront fee structures without conflicts of interest in order to expand his company’s reach to employer sponsored insurance plans.
Former Office of Management and Budget Director Peter Orszag told Congress in 2008 that thanks to PBMs, “we have seen a very dramatic shift towards generics and away from branded drugs.” In 2019, the GAO found they saved the government’s Medicare Part D program $20 billion.
Interestingly, PBMs have found themselves a useful niche within Medicare Part D. Major pharmaceutical and insurance companies have managed to create an environment in which Medicare, the largest buyer of pharmaceuticals, is prohibited from directly negotiating prices with pharmaceutical companies. This restriction necessitated the involvement of PBMs to negotiate drug prices on behalf of Medicare. Thus, PBMs are essentially filling a niche that the pharmaceutical industry itself has orchestrated.
The vilification of PBMs often serves to deflect attention away from the complex, systemic issues at the heart of big pharma and the pharmaceutical industry. These complexities can disadvantage those on the sidelines, including independent pharmacies, uninsured patients, and taxpayers. Cuban's venture, Cost Plus Drugs, shows that a simpler approach can indeed disrupt this convoluted industry. Still, it could achieve even more without the pharmaceutical industry’s existing regulatory manipulations and rent-seeking.
Cuban appears to ignore such patent abuse from brand manufacturers that block the manufacture and use of generics. Part of this may be because of his company’s recent foray into partnering with pharmaceutical companies for medications under patent, like Invokana, at a time when the most significant increases in pharmaceutical spending are coming from brand medications.
Ultimately, Cuban’s venture provides a service by reducing big pharma’s role in health care. Still, his vilification of PBMs inadvertently aids big pharma by diverting attention from the real issues. For the sake of millions of vulnerable patients and the future of our health care industry, we need to move swiftly and wisely in addressing these systemic problems — by fostering competition and curtailing big pharma’s patent abuse.
——-
Dr. Wenzell is a family physician at Simplicity Health Direct Primary Care and is now accepting new patients of all ages. Call 937-813-2124 or click here to schedule your free, no obligation Meet-and-Greet to learn more about our practice and why we think Direct Primary Care is the best way to return the focus of medicine to the patient-physician relationship.
