Mark Cuban aims to disrupt the drug industry. Here’s why you shouldn’t bet against him

·4 min read
Wilfredo Lee/AP

Dallas Mavericks owner Mark Cuban is getting significant buzz for his latest business venture, and rightly so.

Cuban has opened Cost Plus Drug Company, an online pharmacy that provides affordable generic drugs in direct competition with stores such as Walgreens, CVS and even Amazon.

“We will do whatever it takes to get affordable pharmaceuticals to patients,” Alex Oshmyansky, CEO of Mark Cuban Cost Plus Drug, said in a statement debuting the company. “The markup on potentially lifesaving drugs that people depend on is a problem that can’t be ignored.”

Oshmyanksy cold-pitched the idea to the “Shark Tank” billionaire in an e-mail awhile back, and the company did a soft launch about a year ago.

Since it is a registered pharmaceutical wholesaler, the company says it can negotiate with drug companies for a low price, bypass middlemen and large markups, and sell the drugs for a final low price: the actual manufacturer price plus a flat 15% margin and $3 pharmacist fee. There is also a shipping fee, which varies.

The business model is unique but clearly in its early stages. The company has a limited number of drugs available so far. It won’t accept insurance, accepting only out-of-pocket payment, which could be an issue for people who are really short on cash. So far, the only complaints online have been about the fact that all the drugs offered are generic. However, according to the Food and Drug Administration, generic medicine is just as effective as long as the key active ingredients remain in place.

Some of the retail prices the site lists for generic drugs as a comparison, such as montelukast (generic for Singulair, often prescribed for allergies) seem to be on the higher end of the market. At Walgreens, the retail price for Montelukast is listed at $108 sans coupon; it’s listed at Cost Plus Drug as retailing for $169.

Cost Plus Drug contends that markups on generics average “at least” 100%, if not more and even though drugs must be paid for with cash only, the company argues that this is still “less than what most insurance plans’ deductible and copay requirements would total.”

For example, the generic drug version of Gleevec, Imatinib, treats leukemia. A 30-count supply of 400-milligram typically retails for roughly $2500 per month. The lowest price with a voucher is $120 per month, still significant for people on a fixed income. At Cost Drugs Plus, that price is now $47 a month.

Cuban’s site currently offers generic drugs to treat a variety of illnesses, including diabetes, cancer, and asthma. They hope to add more.

In a text, Cuban assured me that he didn’t dream this up yesterday and hope for instant success.

“We have been working on this for two years. It didn’t just happen,” he wrote. “There have been a ton of hurdles: Developing the relationships. Confirming the quality of the manufacturing. That’s why it has taken several years just to get to this point.”

Cuban said that while the company was fine-tuning, its presence “blew up on social” media “far more than we expected.”

“There is still work to be done on it,” he said. “But we are moving forward. As we can source more genetic drugs, we will add them.”

Cost Drugs Plus makes so much sense, I asked Cuban why it hadn’t quite been done before.

“It’s not that [others] didn’t think of it,” he said. “It’s that their economic goals are different. We will put any profits back in the business to grow it. They have shareholders trying to maximize profits. Nothing wrong with that. Just different goals.”

If all goes well, Cuban is hoping the venture will not just reduce the price of drugs for the average consumer but add jobs in the Dallas area, too. The company is hoping to build an $11 million pharmaceutical factory in Dallas, spanning roughly 22,000 square feet, by the end of 2022. Cuban wants to manufacture the drugs the company distributes.

It’s is a brand new venture, and this industry is particularly complicated. Time will tell if the company is able to offer more drugs over time and sustain such low costs. But if anyone can disrupt the marketplace, it’s Mark Cuban.

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