A few weeks ago, Mark participated in the White House Roundtable on Lowering Healthcare Costs and Bringing Transparency to Prescription Drug Middlemen. I found Mark’s comments to be intriguing and highly provocative, so I invited him to publish an edited version exclusively here on Drug Channels.
Read on for Mark’s unfiltered view of the PBM industry. Feel free to add your own thoughts below or on LinkedIn.
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Five Ways that Big PBMs Hurt U.S. Healthcare–And How We Can Fix It
By Mark Cuban, Co-founder, Mark Cuban Cost Plus Drug Company
In a drug channel dominated by three large pharmacy benefit managers (PBMs), how can a company launched in January 2022 be such a big part of the U.S. drug pricing conversation?
The answer is simple. The dominant three PBMs put stock price over health. Here are five of their greatest hits:
1. Zero transparency.
The number one rule when contracting with PBMs is that you don’t talk about the PBMs and their contracts. They prevent everyone–providers, manufacturers, employers, and non-affiliated pharmacies—from making public or discussing their pricing terms or any aspect of their contracts. If you do, they’re happy to sue you.
2. Magic names and specialty pharmacies.
The PBMs have decided to take the drugs they can charge the most for and call them “special.” But there’s nothing special about most of these drugs.
Many of these products are small molecule generic drugs. There’s nothing unique about the captive pharmacies they call special and force their customers to buy from. We’ve had patients tell us that they have been charged 100 times more for specialty drugs like Imatinib or Droxidopa than what they or their employers would pay on Cost Plus Drugs.
Many of these products are small molecule generic drugs. There’s nothing unique about the captive pharmacies they call special and force their customers to buy from. We’ve had patients tell us that they have been charged 100 times more for specialty drugs like Imatinib or Droxidopa than what they or their employers would pay on Cost Plus Drugs.
3. Rebate distortions.
I genuinely believe that CEOs do not understand how their healthcare costs work, particularly as it applies to the rebates they receive from their PBMs. They tend to look at rebates as cash paid by the drug manufacturers. Nothing could be further from the truth.
In reality, rebates are a way that PBMs destroy and distort employer plans at the expense of their employees. That’s because rebates are not paid by the drug manufacturers. They are paid by the company’s sickest and oldest employees.
These rebates could be used to reduce the employee deductibles or to actually pay for the cost of medicines. Instead, the companies keep deductibles higher by forcing sick and older employees to pay more out of pocket, using after-tax dollars.
Because specialty drugs are expensive, employees are likely to reach their deductible caps—while still facing out-of-pocket monthly copays for chronic illness medications.
In reality, rebates are a way that PBMs destroy and distort employer plans at the expense of their employees. That’s because rebates are not paid by the drug manufacturers. They are paid by the company’s sickest and oldest employees.
These rebates could be used to reduce the employee deductibles or to actually pay for the cost of medicines. Instead, the companies keep deductibles higher by forcing sick and older employees to pay more out of pocket, using after-tax dollars.
Because specialty drugs are expensive, employees are likely to reach their deductible caps—while still facing out-of-pocket monthly copays for chronic illness medications.
4. Allowing rebates to determine formularies.
Rebates are also the reason big PBMs restrict the medications they allow to be filled.
PBMS often only reimburse drugs with significant rebates—and exclude drugs from the formulary that don’t have rebates. Why leave out a Humira biosimilar like YUSIMRY that is available on Cost Plus Drugs for a true price of $594, when you can charge an employer more than $8,000 per month for Humira?
Formularies should not exist. Doctors should decide what patients need access to, not the PBMs.
PBMS often only reimburse drugs with significant rebates—and exclude drugs from the formulary that don’t have rebates. Why leave out a Humira biosimilar like YUSIMRY that is available on Cost Plus Drugs for a true price of $594, when you can charge an employer more than $8,000 per month for Humira?
Formularies should not exist. Doctors should decide what patients need access to, not the PBMs.
5. S———ing on independent pharmacies.
S———ing is the appropriate word to describe the financial abuse that we’ve heard about from non-captive pharmacies. I couldn’t find a better word.
These pharmacies have zero leverage, so when the PBM says they must pay a direct and indirect remuneration (DIR) fee that is calculated on a whim by the PBM, they must pay the fee. If a PBM decides to audit a pharmacy, it can invent issues, knowing the pharmacy can’t afford to fight.
I just talked to an independent pharmacist facing $200,000 in fines that is going to put them out of business. Another spoke publicly about how they were fined if a patient doesn’t pick up their medications within 30 days.
But it gets worse. These pharmacies buy their brand medications from distributors for a set price. When a patient brings in a prescription covered by Medicare Advantage, traditional Medicare, or an employer plan, the PBM may not fully reimburse the pharmacy for that claim.
The pharmacy, after putting up cash for the inventory and taking sales risk, is expected to lose money on that script. What do you think we’d say about that on Shark Tank? It’s gotten so bad that the smaller pharmacies are transferring brand scripts to the biggest chains—ending long-term patient relationships, risking that patient’s health, and losing front-of-the-house sales.
These pharmacies have zero leverage, so when the PBM says they must pay a direct and indirect remuneration (DIR) fee that is calculated on a whim by the PBM, they must pay the fee. If a PBM decides to audit a pharmacy, it can invent issues, knowing the pharmacy can’t afford to fight.
I just talked to an independent pharmacist facing $200,000 in fines that is going to put them out of business. Another spoke publicly about how they were fined if a patient doesn’t pick up their medications within 30 days.
But it gets worse. These pharmacies buy their brand medications from distributors for a set price. When a patient brings in a prescription covered by Medicare Advantage, traditional Medicare, or an employer plan, the PBM may not fully reimburse the pharmacy for that claim.
The pharmacy, after putting up cash for the inventory and taking sales risk, is expected to lose money on that script. What do you think we’d say about that on Shark Tank? It’s gotten so bad that the smaller pharmacies are transferring brand scripts to the biggest chains—ending long-term patient relationships, risking that patient’s health, and losing front-of-the-house sales.
HOW WE CAN FIX U.S. HEALTHCARE
I can go on and on about the big three PBMs. They are everything that is wrong with this industry.
Here’s the crazy part: There is a fix. The federal government, states, and self-insured employers can stop doing business with the big three PBMs. There is not a single thing that those big three PBMs do that is unique or can’t be replaced by independent rebate-avoiding PBMs. State and federal agencies and big companies could switch out from those big PBMs and use their competitors. This would change an entire industry in less than five years.
Which brings us back to my original question: why is Cost Plus Drugs in business? It’s simple as well.
Everything that I just described has killed the trust that this country has in our healthcare system. Nobody trusts anything beyond their own doctor.
At Cost Plus Drugs, our product is trust. We believe that trust comes with transparency. Our Cost Plus Drugs business model is amazingly simple: We buy drugs and we sell drugs. No rebates, no magic, no complications. We keep our business simple, which allows us to keep our pricing so low.
Here’s how it works. Cost Plus Drugs carries 2,500 drugs. Our goal is to carry every single one that we’re legally able to carry. When you go to Cost Plus Drugs and find the medication that your doctor prescribed, we will show you our actual cost, what we truly pay for it, our markup of 15%, and the pharmacy fill and shipping fee of $10.
If you want to pick up your prescription at a nearby pharmacy, you can choose a pharmacy in our Team Cuban Card network for the same price, plus a fee that goes to the independent pharmacist. All of it is completely transparent for anyone to see at any time. In fact, we will happily send our complete price list to anyone anywhere, so you can see what our prices are.
Try asking that to one of the big three PBMs. The biggest players do everything possible to hide and obfuscate everything they do.
We can bring back trust and transform our system into one that we can once again be proud of. We simply need to introduce transparency—real transparency—and encourage government agencies and self-employed insurers to act in their own self-interest and do what’s best for the wellness of their employees and patients.
The content of Guest Posts does not necessarily reflect the views of HMP Omnimedia, LLC, Drug Channels Institute, its parent company, or any of its employees. To find out how you can publish a guest post on Drug Channels, please contact Paula Fein (paula@DrugChannels.net).
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