Many Generic Medications can be Sold at a Fraction of Current Prices
“Pharmaceutical Pricing: JAMA Talks with Mark Cuban on Public Health,” JAMA, JAMA Network
Dr Bibbins-Domingo: You’ve basically shown that many generic medications can be sold at a fraction of current prices. In health care terms, what does this tell us about the market?
Mr Cuban: It tells you that it’s not an efficient market…You mentioned [Cost Plus Drugs] as having generics, when our mission is to sell every drug we’re legally allowed to. Why don’t we have all brands? Why don’t we have all specialty medications? The reason is the big [PBMs] owned by the big 3 insurance companies dominate the industry and their formularies dictate what’s paid for and what’s not paid for. If you’re a pharmaceutical manufacturer, regardless of what you make, if it’s branded, you have to pay. You have to bid in the auction to get on the formulary because, if you’re not on the formulary, those 300 million lives that are covered by insurance probably aren’t going to be allowed to buy your medication.
Dr Bibbins-Domingo: So it’s not something specific to generics?
Mr Cuban: No, no, not at all. We’d love to sell every single brand and we’d do it the exact same way, if we could. We talk to those brand manufacturers, and we’ll say, “Why can’t we buy from you? Or why can’t we get the same rebates? Why can’t we get the same type of deal?” [The brand manufacturers] tell us that if [they sell to us at those terms], then those big PBMs and the insurance companies that own them will reduce the positioning of their entire portfolio on those formularies, which could cost them tens of millions, hundreds of millions of dollars, or more. And so they say, “Mark, we love what you’re doing. We’re trying to find a way to work with you, but we just can’t.” I spoke to one CEO of one of the companies a month ago, and I said, “How many lives do we need to have covered out of the 180 million before you would say you’ll work directly with us?” Half. That’s a big number.
So the point is, we no longer have an efficient market. In an efficient market, a brand manufacturer would say,
“Mark, we’ll charge you more, but we’ll sell. We’ll sell through you.”
We’ve got a system right now that is completely inefficient. This week is the 4-year anniversary of Cost- Plus Drugs, and I had always looked at this as a specific issue related to PBMs. What I’ve realized is these big PBMs either own, or are owned by, big insurance companies and they all act the same way.
Dr Bibbins-Domingo: What would have to change to shift to a more efficient market?
Mr Cuban: One or two things. First, the most direct path is to require the biggest 3 insurance companies to divest noninsurance assets. If you don’t get them to divest, they effectively have regulatory capture and scale capture. Scale capture is: “We’re so big nobody really understands how the money flows and how the pieces are interrelated.” They really define the rules of all the economics of the health care industry. Divest not just PBMs, but all their subsidiaries that are not insurance-specific.
If you happen to be a big insurance company, you own a hospital, or a provider, or an oncology center, or an infusion center, or a PBM, or physician practices. [It’s] just like AT&T in 1984, where they controlled all telecommunications. Literally, there’s one big health care company that’s got 2600 subsidiaries. Their intercompany transfers are $200 billion. That’s 0.6% of the GDP of this country. That’s how much control and influence they have. There’s just no way for that market to be efficient. They can left pocket, right pocket things. “We’re just charging you what the physician charged us, or what the provider charged us, or what the center charged us, and we’re just passing it along.” The employer has no idea that they’re getting marked up in a way that is just going right to the insurer.
Part 1: break them up. If I were a Democrat or a Republican, that would be what I was pushing right now.
Part 2: Educate employers. There are 160 million–plus beneficiaries in self-pay plans, right? Some of them are public. Some of them are private. I’ll walk into a CEO’s [office] . . . and within 5 minutes give you 20 things that tell you how you’re getting ripped off.
So, we just rolled over to a new year. Let’s just say [your deductible] is $2000. If you happen to be prescribed a branded medication that has a retail price of $600 (Eliquis was $609 until they just changed it), you have to pay that full retail price until you reach your deductible.
So where does that money go? Well, for a branded medication, like Eliquis was at $600, 50% of that is rebate. So your beneficiary plan holder is paying full retail price, which means that PBM that you hired is the worst negotiator on the planet, even though they sell themselves as being better for reducing drug prices. Because every single one of your beneficiaries that is using a branded medication is paying full retail and 50% of that, depending on what the rebate is, is going to the PBM who keeps, let’s say, 10% of it and sends it to you as your rebate. I’ll sit with the CEO and tell them,
“Do you really understand now that your sickest employees and those with the most chronic illnesses that need medications are writing your company a check through those rebates?”
And then they’ll talk to their HR person, they’ll be in a panic because [I say], “Look, not only are [your employees] writing you a check, but there are going to be times when they don’t buy their medications because their take-home pay may be $30 000 a year and they couldn’t afford the high premium. So, they took the higher deductible and so they can’t afford it. And somebody, God forbid, may drop dead because you hired a PBM that wanted to charge them full retail price and you did nothing about it.”
Dr Bibbins-Domingo: So you want to get employers as the purchasers involved because you think they can negotiate better.
Mr Cuban: Yeah, because they have no clue what they’re doing. In many cases, they’re using consultants or brokers who are ripping them off even further. Some of those consultants are getting fees from the PBM/ insurance companies and now the PBMs are getting smarter. So, it doesn’t come from the PBM, it comes from a subsidiary or somewhere else within the empire, if you will, of subsidiaries. And so as an employer, you don’t know these things. Particularly for a CEO, it’s not your core competency to understand your HR benefits, particularly how people are paying for brand medications within their deductible phase. And so, I’ll walk in there and start educating them on how that works.
Mr Cuban: Yes. And who knows the least and who has the least ability to protect themselves?
Dr Bibbins-Domingo: Well, patients, for sure.
Mr Cuban: Patients. The patient.
Dr Bibbins-Domingo: Maybe there are no good guys in this. Patients are definitely losing.
Mr Cuban: The doctors are still the good guys. The doctors are still the good guys.
[Health care] is your second-largest expense item after payroll, and you have no clue where the expenses come from.
Dr Bibbins-Domingo: You’re describing a system where everybody is trying to find some little leverage point to get something more.
Dr Bibbins-Domingo: If I had the strongest critic of Mark Cuban Cost Plus Drugs here in the room with me, what would they say is the most compelling, legitimate critique of your approach right now?
Mr Cuban: We don’t sell enough brands or specialty medications. And we have the Team Cuban Card, which is a network of 17 000-plus pharmacies so that you can pick things up, but some people might think that that’s not enough pharmacies. Those are legitimate thoughts.
Other people might say 15% markup is too much. Relative to the industry, it’s cheap, but we’ve got to pay the bills. I always try to ask myself, “If I was coming up with a competitor for Cost Plus Drugs, what would I do?” Someone like Amazon could do cost plus one or cost minus.
But the reality is our real product is trust. I was listening to a podcast from a doctor, and I don’t remember who it was, unfortunately, but he said there’s an equation for trust. It’s trust equals transparency divided by self-interest.
And so, the more transparent you are, the higher the numerator, and the less self-interest you have, the lower the denominator, and so your trust. And I think that’s what we’ve really been able to build. People trust us not just because we’re transparent, but because they know a 15% markup is fair.
Dr Bibbins-Domingo: What are the one or two things you’d like clinicians to know about this so that they could get involved or understand more?
Mr Cuban: If you look at independent pharmacies, they’re closing by the hundreds a year. And the reason they’re closing is: for those same brand medications that they won’t allow to be sold through Cost Plus Drugs, when they get reimbursed by insurance companies, [the independent pharmacies get lower reimbursement]. So when you walk in the door for that Eliquis and it costs [the independent pharmacy] $570, the insurance company’s probably reimbursing them $560. Or for a $1300 GLP-1 [receptor agonist] that costs [the independent pharmacy] $1300, they may only be reimbursed $750.
And so the pharmacy won’t even try to fill it. They’ll send it to a chain competitor. That’s very analogous to what’s happening to independent physicians. What the independent pharmacies did, they created associations that go out and lobby. They have smart people like Doug Hoey (CEO of the National Community Pharmacists Association) that stand out there and say,
“This is wrong.”
And so now you’re starting to see a lot of legislation from states. Oklahoma is leading the way, Arkansas is leading the way, Pennsylvania is starting to do some things, Texas hopefully will do stuff in the near future that requires PBMs to fully reimburse and pay a fill fee (for the pharmacist’s time), and they can not steer patients to their own captive pharmacies.
That’s the exact same thing that’s happening with physicians. Physicians are getting under-reimbursed, they’re getting paid late, they’re getting claw backs after the fact—after they’ve offered the service.
They can’t compete with the captive clinics and providers that the insurance companies own, and they’re being put out of network so that even if your best friend is a doctor in network and they know that you are the best specialist for this patient, your best friend gets dinged and they’re not allowed even to refer to you.
You guys don’t have an organization calling everybody out for all this bull that’s just sliding down on your head. That’s dumb.
Dr Bibbins-Domingo: What I hear you saying is we all need to be better informed and then advocate.
Mr Cuban: Yes, but you can not advocate individually.
And you guys need to be a lot bolder, a lot louder . . . call out all these other people. As I’m learning it (and I still have a lot to learn), I’m trying to call out the insurance companies for doing that to independent physicians because that kills health care in this country and it also forces them out of the business.
Now they’re pushing into direct primary care or they sell out. And then when they sell out, now they’re having to do 10 surgeries on ankles a day. Not that they can’t, not that they don’t love doing it, not that they don’t want to maximize the number of patients, but it’s exhausting.
If I’m getting a hip replacement again, I want my doctor rested, not worrying about the next 9 [procedures] they have to do that day.
Dr Bibbins-Domingo: You heard it here first. Mark Cuban wants doctors golfing on Wednesday.
Mr Cuban: Yes. Yes. Or playing mah-jongg.