Opinion | Medicare could save $3 billion by buying drugs like Mark Cuban

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Hussain S. Lalani is a physician at Brigham and Women’s Hospital and a fellow on the Program on Regulation, Therapeutics and Law (PORTAL). Benjamin N. Rome, an instructor at Harvard Medical School, is on the PORTAL faculty. Aaron S. Kesselheim, a professor at Harvard Medical School, is the PORTAL director.

A lot of our patients struggle to afford their medicines, and it’s agonizing to have a front-row seat to this injustice. Despite politicians’ frequent guarantees to lower drug prices, Congress has did not pass any meaningful reforms in a long time. As different states experiment with their very own solutions, one approach spearheaded by Mark Cuban, the billionaire owner of the Dallas Mavericks, has attracted growing attention.

The Mark Cuban Cost Plus Drugs Company, which launched online in January, guarantees lower prices and complete transparency about how those prices are set. This enterprise offers a welcome reprieve to some patients, nevertheless it doesn’t address the basis causes of high drug prices. For that, we’d like congressional motion.

Cuban’s latest company purchases a whole bunch of generic drugs from manufacturers and sells them online on to consumers. Each generic drug is priced at a value negotiated with the manufacturer plus a 15 percent markup, a $3 pharmacy dishing out fee and $5 for shipping. Remarkably, this sometimes adds as much as substantially lower prices for a lot of patients.

In a recent study published within the Annals of Internal Medicine, we analyzed 89 generic drugs sold by Cost Plus Drugs and located that Medicare could have saved greater than $3 billion in 2020 by purchasing 77 of them at Cost Plus Drugs prices. For instance, Medicare paid greater than $2 per pill for aripiprazole, a commonly used psychiatric medication, while Cuban’s company sells the identical formulation of the drug for $0.24 per pill. At those prices, the federal government could have saved $233 million in 2020 on just this one drug.

So where do these savings come from?

By directly purchasing and selling drugs, the corporate eliminates insurance firms, pharmacy profit managers, wholesalers and in-store pharmacies. These multiple middlemen play necessary roles in the provision chain but in some cases can introduce inefficiencies that result in higher prices for patients. This is especially problematic for uninsured patients or those with high-deductible health plans.

To be clear, Cuban’s company isn’t the primary direct-to-consumer firm to sell generics. Walmart, Costco and several other other retailers also sell low-cost generic medicines. Moreover, GoodRx offers free coupons for a whole bunch of generic drugs that could be used at pharmacies across the country.

Beyond offering savings for some patients, Cost Plus Drugs’s transparent pricing begins to lift the veil on drug prices, which have been shrouded in secrecy. Understanding the true cost of production and distribution may also help us to know when and why Medicare is overpaying for generics.

But Cuban’s approach has limitations. Patients must pay the total cost out of pocket, and people dollars don’t count toward their insurance deductibles. Shopping around to seek out the bottom price for every generic is cumbersome and could be particularly difficult for patients taking multiple medications or those with limited health-care experience or digital literacy. This process can also be time-consuming for patients and clinicians, who might have to send prescriptions to multiple pharmacies for a single patient.

Most significantly, Cuban’s company doesn’t provide relief for patients who need expensive brand-name drugs, including biologics and specialty drugs — which frequently cost individual patients tens of hundreds of dollars per 12 months. It is because, unlike most other countries, the USA allows patent-holding brand-name manufacturers the liberty to set prices as they need. Insurers and pharmacy profit managers can seek to barter higher prices, but they often lack the leverage to realize a meaningful discount. This is especially true of Medicare, which is required by law to cover certain drugs, including those treating cancer.

Even with insurers footing many of the bill, high prices for brand-name drugs are passed on to patients. In Medicare, for instance, the broken Part D prescription drug profit forces patients to pay greater than $10,000 a 12 months out of pocket for certain expensive medications.

Cuban has said that his company shall be adding brand name drugs to its offerings. Nonetheless, even when Cost Plus Drugs negotiates steep discounts with manufacturers, the worth without insurance would still be out of reach for many patients.

Thus, to meaningfully lower drug prices for all Americans, Congress must act. The House was on the fitting track last fall, proposing to permit Medicare to barter prices for a limited variety of brand-name drugs, disincentivize annual price increases over inflation, cap out-of-pocket spending at $2,000 per 12 months and limit insulin copayments to $35 per thirty days. But those changes were a part of the ill-fated $1.7 trillion Construct Back Higher Plan. The Senate is actively attempting to salvage an analogous set of drug pricing reforms, although passage is removed from certain. The scope of those changes is proscribed, however the reforms could reduce excess spending and help thousands and thousands of Americans afford their medicines.

Cuban’s company can provide relief for some patients and chip away on the secrecy surrounding generic drug prices. But with brand-name drug prices skyrocketing and 1 in 4 patients struggling to afford their medicines, congressional motion is desperately needed.

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