Disrupting the Pharmaceutical Industry

A Harvard Business School Healthcare Alumni Association C-suite Q&A with Mark Cuban, Cost Plus Drugs co-founder

Michael Wong: At the November 2022 HBS Healthcare Alumni Association’s annual conference,1 a spirited debate around this year’s Inflation Reduction Act of 2022’s likely impact on prices and new medicine development took place; and although you were not even at the panel,2 your company was brought up during the concluding comments. Why do you think your recent 2022 efforts have garnered so much attention when there have been so many other ideas proposed to solve this long-standing challenge of safe and affordable medicines for communities?

Mark Cuban: You don’t need a degree from Harvard to understand the simple and transparent business model that my start-up has deployed. As a public-benefit corporation (PBC), our social mission of improving public health is just as important as the bottom line. We’ve built a vertically integrated supply chain to transparently charge a standard markup on every drug we sell. For instance, we charge $47 a month for Imatinib (Gleevec®), a common leukemia medication which typically retails for more than $9,600 a month or, with a drug voucher, would cost roughly $120 a month.

Our medications are available directly to patients or through our employer-sponsored programs. To date we have nearly 1,000 of the most highly utilized and/or most high-cost generic medications in our pharmacy and so it is not surprising that over 1.2 million people have created accounts with us.

As for why I think there has been so much attention; it is the huge potential impact and value that our company can potentially create. For instance 3rd party researchers have shared their objective viewpoints; such as the Annals of Internal Medicine which suggested that Medicare could have saved up to $3.6 billion a year had it purchased generic drugs from Cost Plus.3

Well, biopharma firms seem to be under constant scrutiny, but how about the value that they provide, like they did with the fast response to creating products to combat COVID-19?

I am not challenging the value that new innovative medicines can bring to solve ailments. However, disruption is needed when there are clear inefficiencies in the market. For instance, one report shared how the CBO estimates that the drug pricing provisions in the Inflation Reduction Act law could reduce the federal deficit by $237 billion over 10 years (2022-2031).4

Still, as the provisions show how some of the price changes don’t take place until 2026 and thereafter, my company provides value now, in 2022. Last month, we announced that Capital Blue Cross will be the first health plan to partner with us. To secure a better understanding of our business model, check out The Wall Street Journal interview and hopefully your readers will enjoy it as much as they like seeing me on Shark Tank!5

All kidding aside, the current state of the overall healthcare ecosystem needs to be disrupted in America. According to a 2021 Cost of Care Survey by Genworth, a private room in a nursing home costs $297 per day, or $9,034 per month. So just imagine what this could mean for your sandwich generation alums who not only might have tuition payments for kids in college and private school but also six-figure payments for a parent per year if their parent(s) do not have such insurance. These are big numbers that even many of your alums might not be able to handle if disruption doesn’t happen soon.

Mark Cuban is an entrepreneur, television personality, and media proprietor. Besides being the owner of the Dallas Mavericks of the National Basketball Association (NBA) and one of the main investors on Shark Tank, Mark recently launched his “Mark Cuban Cost Plus Drug Company” to disrupt the pharmaceutical industry and provide complete price transparency from manufacturing to prescription delivery.

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