Cuban has an elixir for a sick U.S. health system
One of the most challenging conundrums in American life is the high cost of medical care and prescription medicine, especially compared with other wealthy countries.
Although very little about needing health care and medication meets the definition of a market transaction between a willing buyer and seller, many in this country have a powerful fetish for markets over government price caps.
Putting health insurance companies in the mix further magnifies price distortions and muddies the picture. Amid thousands of dollars per month in life-saving prescription medications and five-figure lifesaving procedures, insurance deductibles, negotiations and copays obscure the true cost to consumers and the true revenue to providers.
This is my best explanation for why we have the weirdest health care-pricing mechanisms imaginable. The price obfuscation and results couldn’t be worse if they were purposefully designed this way by demons.
In any reasonable — nonmarket-fetish — society, the government would cap prices of certain prescription medications, and Big Pharma and insurance companies would have to deal with it. But in our country, state and federal governments reject such appropriate intervention.
“We’re not socialists. We’re not Venezuelans or Cubans,” the fetishists say.
I hope we all buy drugs the Cuban way soon.
Ah, but there’s a different way to be a Cuban. I’m particularly interested in the giant experiment launched in January by Mark Cuban.
Cuban owns the Dallas Mavericks and is a featured investor on the entrepreneurship-related television show “Shark Tank.” His initial fortune came from building and selling tech companies, in particular Broadcast.com, which he sold to Yahoo.com in 1999, netting about a billion dollars for himself. Yahoo’s acquisition of Broadcast.com was considered one of the worst internet transactions of all time after it shut down the service in 2002. Cuban has good timing.
In a more recent show of apt timing, he launched the Mark Cuban Cost Plus Drug Co. in January, offering 100 generic prescription drugs for sale online. The idea is for a prospective user to search for a brand-name drug online and find the generic equivalent on the Cost Plus site. This could be 25 percent less expensive than the brand name provided by one’s doctor — even 95 percent less in some cases.
Cost Plus has radical transparency and consistency around its pricing, which it shows on the site. The customer price is always set by the following formula: acquisition cost from the manufacturer, plus 15 percent, plus $3 pharmacy cost, plus about $5 shipping. The difference in clarity between that and the strange way prescription drugs are bought by most people is wild. The price savings in many cases are also potentially wild.
Since Cost Plus does not take insurance, users must compare the all-in cost of their current medications — accounting for their deductibles — to an outof-pocket cost for this service.
My friend Venessa is the only one on my social media networks who replied that she uses Cost Plus, which partly tells me that the Cuban experiment is in its early days.
Venessa left her job in January, and she and her self-employed husband decided to self-insure, which is to say they pay out of pocket for health care.
After giving birth to her second child, Venessa acquired a prescription for Zoloft to manage anxiety. Zoloft is also an appropriate substance to take while breastfeeding.
The monthly cost of Zoloft is $150 to $400, depending on
dosage and one’s insurance. Because she is paying out of pocket, Venessa switched to the generic equivalent, Sertraline, and she buys it from Cost Plus for $8.90 per month. She was pretty excited to tell me about Cost Plus and said she’s told her friends to try it.
Getting started on the program, she said, involved a back-and-forth process with her prescriber, who did not have the information for Cost Plus in its system, as it likely would for pharmacies at CVS, Walgreens or HE-B, for example.
We discussed a few limitations. Because it takes about four days to arrive, Venessa said that for urgent medications — such as antibiotics for an infection of her child — she would go to a pharmacy to get medicine on the same day. Also, only the patient can create an account and order.
It is not clear to me — and the company did not respond to my query — how many customers Cost Plus has acquired since January. It launched with a list of 100 generics. Since then, it has expanded to 200 generics, covering 58 medical conditions.
For common conditions, it offers a substantial menu. In addition to Sertraline, the site offers 42 other generics for brand-name mental health medications, including names I recognized like Effexor, Wellbutrin, Prozac and Abilify.
For another common condition, high blood pressure, it offers 43 generics. It lists six generics for birth control and nine for high cholesterol. You get the idea. There are an incredible number of prescription meds and generics out there, and certainly Cost Plus won’t have them all, but it seems likely it would have a lot of what people commonly need.
This is clearly a slam dunk for people like Venessa who pay out of pocket. It’s less certain whether people with platinum-level health care plans would save money. It depends on an individual’s plan and prescription deductibles.
People with health insurance generally become indifferent to the costs of medicines above their deductibles. As long as the insurance company pays, in a sense, who cares? Except that as a system, it matters.
With his company, Cuban is betting that an entrepreneurial, marketbased disruptor is the right way to fight the high and opaque medical costs we all experience. I hope it works. I hope we all buy drugs the Cuban way soon. It would bring some needed clarity and price pressure to our current system, with an entrepreneurial market mechanism.