In a country built on capitalist ideology, it’s no secret that the United States healthcare industry is largely privatized. But while capitalism promotes economic growth, innovation, and freedom, it also establishes a constant battle between investing in the public good, or for private benefit. Exploitation in the American pharmaceutical industry is a salient example of this phenomenon. The companies that research, produce, and distribute the bulk of medicines on the market today are indeed privatized, allowing them to prioritize profits over patients.
However, on this national stage where altruism towards the consumer is scarce, a new pharmaceutical company is attempting to curtail corporate greed by reducing drug costs, making medicine more accessible. This capitalist venture, dubbed the Mark Cuban Cost Plus Drug Company, is far from a perfect solution to exorbitant drug prices in the US, but it tackles the exploitative nature of the existing industry and paves the way for similar efforts in the future.
The Need for Affordable Medications — and a Potential Solution
In 2016, Dr. Alex Oshmyansky, an American radiologist from Colorado, founded a small company called Osh Affordable Pharmaceuticals. The name was intentionally direct; the company’s goal was to provide patients with generic drugs at dramatically lower prices than other pharmaceutical companies.
Within two years, Oshmyansky had garnered the attention and investment of American businessman, philanthropist, and television personality Mark Cuban. In a cold email, Oshmyansky outlined his vision of a transparent pharmaceutical company that was able to distribute prescription drugs to patients at significantly cheaper prices. This effort hoped to inspire an industry-wide decrease in drug costs, or at least combat extant monopolies.
Intrigued, Cuban invested an undisclosed amount in the venture and changed the name to the Mark Cuban Cost Plus Drug Company. This was the first time Cuban lent his name to one of the many business ventures he funded, knowing it could be his legacy and a highly important development within the realm of private healthcare enterprise. This was because Cost Plus Drugs could help reframe public expectations of privatized medicine.
As a practicing physician, Oshmyansky was driven to action by the extortionate drug prices that were unaffordable for his daily patients. In one example, healthcare CEO Martin Shkreli approved a 5,455% cost markup of his company’s antiparasitic drug from $13.50 to $750 per pill, which Oshmyansky harshly criticized. This pattern is widespread throughout the industry, affecting even cancer treatments like sipuleucel-T and leuprolide.
Cuban’s interest in the venture is the wild card. With 100 other businesses to his name, it seems odd for him to suddenly want to take on Big Pharma. While some may chalk his motives up to boosting public image, Cost Plus Drugs consumes much of Cuban’s time, energy, and resources when a sizable donation to charity might achieve the same goal. His dedication illustrates that the company is not just for show — Cuban truly seems to care about the public accessibility of medicine and is taking proactive steps to promote it.
Cuban has stated he isn’t looking to profit from the endeavor, either. In one interview with Texas Monthly, Cuban said, “I would make a fortune from this, but I won’t… I’d rather f— up the drug industry in every way possible.”
This idea of disrupting the pharmaceutical industry supply chain is worth examining because of the increasing severity of healthcare unaffordability. According to a September 2021 Gallup poll, 18 million Americans were unable to pay for at least one prescription medication for their household due to ever-rising costs, and one in 10 Americans skipped doses to save money.
For a first world country at the forefront of medical innovation, these statistics are surprising and frankly embarrassing. A significant proportion of the Americans left behind, unable to get treatment, are low- to middle-income families with little to no insurance or perhaps a high deductible plan. They struggle to keep up with rising food and housing costs, and are thus often incapable of affording overpriced medications.
As a founding partner of a Florida medical practice, Dr. Felicia Fox understands the battle between treatment affordability and quality healthcare. In an interview with the Harvard Political Review, Fox emphasized these frustrations, acknowledging the complexity of the pharmaceutical manufacturing and distribution processes, but also pointing out that “drug prices can be brought down significantly for patients to a much more affordable range” through platforms like GoodRx or manufacturer coupons. She explained that patients “are then able to obtain their necessary medications with much less difficulty.”
Fox noted that this dynamic “raises the issue of where the real problems arise: Why are those rates not provided at the onset for all patients?” She believes strongly in a system of free enterprise and government aid for those in need, but recognizes that “the system, however, has been so abused and taken advantage of that it has led to exorbitant costs and mistrust of the very systems developed to help.”
Fox is right. There are many systemic, exploitive factors that contribute to high drug costs, from government to insurance to the industry itself. Cost Plus Drugs is working to make healthcare accessible despite these obstacles.
Why Are Medications So Expensive, and What is Cost Plus Drugs Doing to Combat It?
Why was it easier to tackle the issue of high drug costs through private enterprise, like Cuban’s Cost Plus Drugs, instead of through legislation? First, the US legislature does not actively regulate drug prices. No existing federal legislation currently does, and this precedent is unlikely to change considering the American government’s prioritization of a free market. While some policies like the Medicaid Drug Rebate Program and the Inflation Reduction Act of 2022 are aimed at reducing drug costs, they are insurance-specific and do not apply to all Americans. Many legislators have campaigned against even these policies. This history of federal reluctance to regulate drug prices implies that introducing new, drug-pricing legislation would be unproductive, heavily limited by party lines and bureaucracy. Cuban had more influence as a venture capitalist than a lobbyist to create change quickly, and he did.
High drug prices are not just unchallenged, but maintained by US patent laws. The federal government regulates access to medicine by approving new drugs and offering production incentives to developers. In 2010, for example, the Affordable Care Act established the Biologics Price Competition and Innovation Act, which gave a 12-year exclusivity period to the original manufacturers of new biologics (drugs made from living organisms) before any biosimilars (“off-brand” versions of existing biologics) could enter the market. Thus, for 12 years, there is essentially a monopoly on novel treatments, where prices are set by the manufacturer without competition to drive them down.
| Type of Exclusivity | Exclusivity Period Length |
| Orphan Drug Exclusivity (approved to treat diseases affecting <200,000 in the US) | 7 years |
| New Chemical Exclusivity | 5 years |
| Pediatric Exclusivity | 6 months + existing exclusivity |
Such monopolies do help preserve innovation. By rewarding developers for their pharmaceutical contributions, American medicine continues to advance as companies compete to formulate newer, better treatments. If the incentives were removed, research and development might slow, stagnating scientific progression.
However, these same monopolies allow prices to climb beyond consumer budgets. In an interview with the HPR, Nate Rollerson, a high school science teacher who formerly worked in pharmacy, stated that “If the whole point [of medicine] is to improve lives, then it can’t be so outrageously priced that it is unobtainable by the target.”
Cost Plus Drugs is limited in that it cannot ignore U.S. patent protections. However, it increases the accessibility of medicine by selling generic drugs, or drugs without patent protections, to the public through a unique pricing model that is cheaper and more transparent than other pharmacies. The company has recently made plans to begin manufacturing generics as well, building its own drug manufacturing facility in Texas by 2024. As the company expands, so will its capacity to benefit a greater part of the population by making more medications more affordable.
The organization of pharmacies themselves also perpetuate the issue of high drug prices. Without government regulation, pharmaceutical companies are free to set their own favorable costs for life-saving drugs. According to Rollerson, “The pharmaceutical industry is very complex. Within this complexity you have portions that are pragmatic and tolerable, and other portions that are exploiting the system for their own benefit.” Typically, drug prices are set according to negotiations between the three levels of business — manufacturer, pharmacy benefit managers (PBMs), and pharmacies — that, according to emergency medicine pharmacist Dr. Caroline Welch, “all work together” to distribute medicine while profiting off their monopolies.
Unlike other pharmacy companies, Cost Plus Drugs buys drugs directly from the manufacturer, without negotiating for rebates and other pharmacy-centered benefits. It then sells the products to patients at cost plus expenses, cutting out the PBMs and middlemen that hide price hikes behind red tape and legalese. This is the defining feature of Cost Plus Drugs: a transparent pricing model. All drug prices follow a clear pattern, such as a 15% markup, $3 labor fee, and $5 shipping fee.
Many individuals point to insurance as a way to cover high costs. However, while about 92% of Americans do have health insurance, the remaining 8% constitute 30 million people who are unlikely to be able to afford the medicines they need. Rollerson, speaking from his former experience in the pharmaceutical industry, elaborated that “I have seen financial costs become an obstacle for more patients than I would like. This is especially true for the uninsured, underinsured, and the extremely high deductible groups. The costs can be prohibitive in some of these cases.”
Welch identified another obstacle to treatment: the Medicare Part D “Donut Hole.” She described it as “a coverage gap” where Medicare stops covering medical expenses at a certain point until a patient hits the out of pocket maximum, “which can be beyond their budget… making it incredibly difficult to get the medication needed.”
The solution of Cost Plus Drugs was to bypass the need for insurance completely. The pharmaceutical company doesn’t accept any form of insurance payment — all costs are paid out-of-pocket. While this may seem counterintuitive, Cost Plus Drugs offers medications at such low prices that they are usually more affordable than at other pharmacies that take insurance.
The Impact and Limitations of Cost Plus Drugs
Given the many benefits of Cost Plus Drugs, some may believe that this company will inspire lasting change. Optimistically, it could upend the pharmacy supply chain by undercutting prices industry-wide and forcing other corporations, and even legislatures, to follow suit. However, Cost Plus Drugs is nowhere near the scale needed to realize these goals.
As a newly formed organization, Cost Plus Drugs is smaller than more established pharmacies, with fewer funds and fewer than 100 employees. Rollerson noted his concern that, “There are only three PBMs that control 80% of the market and three major wholesalers in the pharmaceutical industry. Cost Plus Drugs would have to compete with those before they can make a real impact.”
In addition, it does not have a manufacturing plant to produce its own generic drugs, though this is expected to change. As of now, however, only about 1,000 medicines are currently available on the online pharmacy, compared to tens of thousands existent in the market. Patrons must also have a mailing address, which makes it difficult for homeless individuals to utilize the service.
The pharmacy’s remote, website setting also poses issues. Welch pointed out that the “snail mail” delivery model “can be very dangerous” when applied to emergent medicines such as blood thinners that must be received within specific time frames. Fox also emphasized the importance of having a “personalized relationship” with a pharmacist who can “reiterate instructions, indications and side effects” as incredibly important for effective healthcare.
However, Mark Cuban’s pharmaceutical company does provide a significant benefit for certain groups. For retirees, as well as “young, healthy individuals who choose not to have insurance,” Welch maintains that Cost Plus Drugs may be a useful way to obtain necessary medication.
While not a total solution, Cost Plus Drugs is challenging the pharmaceutical industry that has exploited American patients for years. It has shown that capitalist ventures can be altruistic and prioritize patients over paychecks. Most importantly, it will continue to expand and make medicine more affordable to the public as it develops over the coming years. Perhaps one day it will revolutionize pharmacy, leading by example.
Comp Director
