Medicare could have saved up to $3.6 billion in 2020 if it bought generic drugs at the prices paid by billionaire entrepreneur Mark Cuban’s drug company, according to a new study.
The study from researchers at Brigham and Women’s Hospital in Boston, published in the journal Annals of Internal Medicine, suggests inefficiencies in the way Medicare currently pays for generic drugs.
The Mark Cuban Cost Plus Drug Company, launched online at the start of this year, seeks to simplify the convoluted supply chain for drugs and offer savings to consumers. It offers commonly used generic drugs at a 15 percent markup, plus a $3 dispensing fee and $5 shipping fee. It does not accept insurance, meaning patients pay out of pocket.
That simplified model offers significant savings, the study found. The $3.6 billion in savings amounts to 37 percent of the $9.6 billion that Medicare spent on the 89 drugs examined in the study. There were savings to be had on 77 of those drugs, and 12 with no savings.
“Generic drug competition is a major source of prescription drug savings in the United States, but the lower prices from a direct-to-consumer model highlight inefficiencies in the existing pharmaceutical distribution and reimbursement system, which includes wholesalers, pharmacy benefit managers, pharmacies, and insurers,” the study states. “By one estimate, this supply chain retains 64% of every dollar spent on generic drugs, compared with 25% of every dollar spent on brand-name drugs before rebates.”
Cuban tweeted at President Biden and a string of congressional leaders with a link to the study, saying, “Have your people call my people and let’s get this done.”
Cuban’s efforts and the study are focused on generic drugs, which are already generally cheaper and older medications compared with brand-name drugs.
Congress’s efforts to change the way Medicare pays for drugs have mostly been focused on the more expensive brand-name drugs. Democrats are pushing a proposal to allow Medicare to negotiate lower prices on some of these drugs, a long-held goal for the party.
The study authors conclude that policy efforts at price transparency, increasing competition and limiting pharmacy and distribution costs could help bring similar savings to Cuban’s company to Medicare as a whole.